What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-07 compared with 2024-11-07 · 538 added, 829 removed, 1537 unchanged (47% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

September 30, 2024

March 31, 2025

December 31, 2024

36 unchanged sentences

60,000 67,215

Borrowings under Bank Term Funding Program

109,000 212,500

Repurchase agreements

10 unchanged sentences

5,000,000 shares authorized;

none issued or outstanding

Common stock, $ 1.00 par value per share;

14 unchanged sentences

(Amounts in thousands, except share data)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

INTEREST INCOME

Interest and fees on loans

$ 30,552 $ 32,135

Interest on investment securities:

1 unchanged sentence

Total interest income

34,434 35,722

INTEREST EXPENSE

Interest on deposits

14,640 14,845

Interest on borrowings

Total interest expense

16,089 18,506

Net interest income

18,345 17,216

Provision for credit losses

( 3,596 ) ( 1,419 )

Net interest income after provision for credit losses

21,941 18,635

NONINTEREST INCOME

Service charges on deposit accounts

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

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

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

Gain on sale of loans

Servicing fees and fee income on serviced loans

Interchange fees

1 unchanged sentence

Change in the fair value of equity securities

Legal settlement

Other operating income

1 unchanged sentence

Income before noninterest expense

23,952 21,383

NONINTEREST EXPENSE

6 unchanged sentences

Total noninterest expense

16,238 15,296

Income before income tax expense

Income tax expense

$ 6,293 $ 4,707

EARNINGS PER SHARE

Basic earnings per share

$ 0.64 $ 0.48

Diluted earnings per share

2 unchanged sentences

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

$ 6,293 $ 4,707

3 unchanged sentences

5,478 ( 3,810 )

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

( 1 ) — 302 1

Total other comprehensive income (loss)

5,478 ( 3,810 )

Total comprehensive income (loss)

Total comprehensive income

$ 11,771 $ 897

7 unchanged sentences

Three months ended:

September 30, 2023

Balance at beginning of period

$ 9,831 $ 145,347 $ 112,344 $ ( 49,165 ) $ 218,357

Surrendered shares

— ( 7 ) — — ( 7 )

Dividends declared, $ 0.10 per share

— — ( 977 ) — ( 977 )

Stock-based compensation

2 525 — — 527

Shares repurchased

( 53 ) ( 624 ) — — ( 677 )

— — 2,781 — 2,781

Other comprehensive loss, net

— — — ( 11,287 ) ( 11,287 )

Balance at end of period

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

September 30, 2024

Balance at beginning of period

$ 9,829 $ 145,918 $ 123,510 $ ( 49,061 ) $ 230,196

Surrendered shares

— ( 7 ) — — ( 7 )

Dividends declared, $ 0.105 per share

— — ( 1,031 ) — ( 1,031 )

Stock-based compensation

1 518 — — 519

Shares repurchased

( 2 ) ( 36 ) — — ( 38 )

— — 5,381 — 5,381

Other comprehensive income, net

— — — 10,522 10,522

Balance at end of period

$ 9,828 $ 146,393 $ 127,860 $ ( 38,539 ) $ 245,542

Comprehensive

Stockholders’

(Loss) Income

Nine months ended:

September 30, 2023

March 31, 2024

Balance at beginning of period

$ 9,748 $ 145,456 $ 116,711 $ ( 45,147 ) $ 226,768

Cumulative effect of adoption of ASU 2016-13, net

— — ( 4,295 ) ( 4,295 )

Surrendered shares

1 unchanged sentence

Options exercised

14 182 — — 196

Dividends declared, $ 0.10 per share

9 unchanged sentences

$ 9,782 $ 145,739 $ 120,441 $ ( 48,957 ) $ 227,005

September 30, 2024

March 31, 2025

Balance at beginning of period

19 unchanged sentences

(Amounts in thousands)

Nine months ended September 30,

Three months ended March 31,

$ 6,293 $ 4,707

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

1 unchanged sentence

Provision for credit losses

Net accretion of purchase accounting adjustments

( 3,596 ) ( 1,419 )

Net amortization (accretion) of purchase accounting adjustments

Provision for other real estate owned

Net accretion of securities

Loss on call or sale of investment securities, net

(Gain) loss on sale or disposition of fixed assets, net

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

Gain on sale of loans to First Community Bank

Net (accretion) amortization of securities

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

Gain on early extinguishment of subordinated debt

FHLB stock dividend

( 70 ) ( 53 )

Stock-based compensation

1 unchanged sentence

Net change in value of bank owned life insurance

( 448 ) ( 388 )

Amortization of subordinated debt issuance costs

Change in the fair value of equity securities

Income from legal settlement

Net change in:

Accrued interest receivable

( 840 ) ( 681 )

Accrued taxes and other liabilities

1 unchanged sentence

Cash flows from investing activities:

Proceeds from sales of investment securities available for sale

Purchases of securities available for sale

Purchases of securities held to maturity

( 17,345 ) ( 5,411 )

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

2 unchanged sentences

Purchases of nonmarketable equity securities

( 40 ) ( 936 )

Purchases of equity securities at fair value

Net decrease in loans

Proceeds from sales of other real estate owned

20,821 30,012

Proceeds from sales of fixed assets

Purchases of loans

Purchases of fixed assets

( 215 ) ( 112 )

Proceeds from surrender of bank owned life insurance

1 unchanged sentence

Purchases of other investments

( 50 ) ( 40 )

Distributions from investments

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

Net cash provided by (used in) investing activities

Net cash provided by investing activities

15,675 35,895

INVESTAR HOLDING CORPORATION

2 unchanged sentences

Cash flows from financing activities:

Net increase in customer deposits

Net increase in repurchase agreements

Net increase (decrease) in customer deposits

1,417 ( 47,867 )

Net increase (decrease) in repurchase agreements

2,926 ( 783 )

Net decrease in short-term FHLB advances

Net (decrease) increase in borrowings under the BTFP

Proceeds from long-term FHLB advances

Repayment of long-term FHLB advances

Net increase in borrowings under the Bank Term Funding Program

Cash dividends paid on common stock

( 1,032 ) ( 975 )

Proceeds from stock options exercised

Payments to repurchase common stock

( 649 ) ( 173 )

Extinguishment of subordinated debt

Net cash (used in) provided by financing activities

Net cash used in financing activities

( 4,553 ) ( 33,889 )

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of period

27,922 32,009

Cash and cash equivalents, end of period

$ 43,522 $ 41,845

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES

Transfer from loans to other real estate owned

Transfer from bank premises and equipment to other real estate owned

See accompanying notes to the consolidated financial statements.

2 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company is a financial holding company, headquartered in Baton Rouge, Louisiana that provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, National Association, a national bank, primarily to meet the needs of individuals, professionals and small to me dium-sized businesses.

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

March 31, 2025

, the Company operated 20 full service branches located in Louisiana, three full service branches located in Texas and six full service branches located in Alabama and had 329 full-time e quivalent employees.

Basis of Presentation

2 unchanged sentences

However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included.

The results of operations for the three and nine month periods ended September 30, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year.

The results of operations for the three month period ended March 31, 2025 are not necessarily indicative of the results that may be expected for the entire fiscal year.

These statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2024 , including the notes thereto, which were included as part of the Company’s Annual Report.

Nature of Operations

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

September 30, 2024

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

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.

Principles of Consolidation

1 unchanged sentence

All significant intercompany accounts and transactions have been eliminated in consolidation.

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.

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates, and such differences could be material.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses.

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 our 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 allowance for credit losses.

In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses.

Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

Because of these factors, it is reasonably possible that the allowance for credit losses may change materially in the near term.

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 ACL may be necessary based on changes in economic conditions, changes in conditions of borrowers’ industries or changes in the condition of individual borrowers.

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 ACL 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 other-than-temporary impairments of securities, and the fair value of financial instruments and goodwill.

Rapidly changing inflation rates and rising interest rates have made certain estimates more challenging, including those discussed above.

Reclassifications

Certain reclassifications have been made to prior period balances to conform to the current period presentation.

A changing interest rate environment, elevated levels of inflation and changing U.S.

trade and tariff policies have made certain estimates more challenging, including those discussed above.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Accounting Standards Adopted in 2025

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 became effective for the Company on January 1, 2025.

The Company will provide the required disclosures in its Annual Report on Form 10 -K for the year ended December 31, 2025, and the adoption of ASU 2023 - 09 is not expected to have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

7 unchanged sentences

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.

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 December 2023, the FASB issued ASU 2023 - 09, which enhances the transparency and decision usefulness of income tax disclosures.

The adoption of 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.

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.

EARNINGS PER SHARE

The following is a summary of the information used in the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2024 and 2023 (in thousands, except share data).

Three months ended September 30,

Nine months ended September 30,

The following is a summary of the information used in the computation of basic and diluted earnings per common share for the three months ended March 31, 2025 and 2024 (in thousands, except share data).

Three months ended March 31,

Earnings per common share – basic

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

income allocated to participating securities

Net income allocated to common shareholders

16 unchanged sentences

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Stock options

7,405 — 6,367 8,886

401 58,153 4,420 70,267

INVESTAR HOLDING CORPORATION

4 unchanged sentences

Amortized Cost

September 30, 2024

March 31, 2025

Obligations of the U.S.

28 unchanged sentences

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Proceeds from sales

$ — $ — $ 7,906 $ 2,364

$ — $ — $ — $ 1

$ — $ — $ ( 383 ) $ ( 2 )

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

Amortized Cost

September 30, 2024

March 31, 2025

Obligations of state and political subdivisions

11 unchanged sentences

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

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

The Company had no securities classified as trading as of March 31, 2025 or December 31, 2024 .

INVESTAR HOLDING CORPORATION

3 unchanged sentences

12 Months or More

September 30, 2024

March 31, 2025

Obligations of the U.S.

27 unchanged sentences

$ 25,544 $ ( 361 ) $ 282,120 $ ( 61,309 ) $ 307,664 $ ( 61,670 )

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

At March 31, 2025 , 688 o f the Company’s AFS debt securities had unrealized losses totaling 14.9 % of the individual securities’ amortized cost basis and 13.7 % of the Company’s total amortized cost basis of the AFS investment securities portfolio.

At such date, 623 of the 688 securities had been in a continuous loss position for over 12 months.

2 unchanged sentences

12 Months or More

September 30, 2024

March 31, 2025

Obligations of state and political subdivisions

13 unchanged sentences

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

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and approximate fair value of investment debt securities, by contractual maturity, are shown below as of the dates presented (dollars in thousands).

The amortized cost and approximate fair value of investment debt securities, by contractual maturity, are shown below as of March 31, 2025 (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.

Securities Available For Sale

Securities Held To Maturity

September 30, 2024

Due within one year

$ 9,415 $ 9,310 $ 960 $ 955

Due after one year through five years

27,931 27,259 2,748 2,615

Due after five years through ten years

31,689 29,113 3,000 3,042

Due after ten years

330,580 284,964 11,594 11,406

Total debt securities

$ 399,615 $ 350,646 $ 18,302 $ 18,018

Securities Available For Sale

Securities Held To Maturity

December 31, 2023

Available for Sale

Held to Maturity

March 31, 2025

Due within one year

8 unchanged sentences

$ 400,211 $ 345,728 $ 42,268 $ 42,720

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

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

Accrued interest receivable on the Company ’ s investment securities was $ 2.4 million and $ 1.9 million at March 31, 2025 and December 31, 2024 , respectively, and is included in “ Accrued interest receivable ” on the accompanying consolidated balance sheets.

At March 31, 2025 , securities with a carrying value of $ 67.4 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $ 68.1 million in pledged securities at December 31, 2024 .

Equity Securities

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

Equity securities at fair value include marketable securities in corporate stocks and mutual funds and totaled $ 2.5 million and $ 2.6 million at March 31, 2025 and December 31, 2024 , respectively.

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

2 unchanged sentences

Both cash and stock dividends are reported as income.

Nonmarketable equity securities also include investments in our other correspondent banks including Independent Bankers Financial Corporation and First National Bankers Bank stock.

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 September 30, 2024 and December 31, 2023 was $ 14.0 million and $ 13.4 million, respectively.

The balance of nonmarketable equity securities at March 31, 2025 and December 31, 2024 was $ 14.3 million and $ 16.5 million, respectively.

INVESTAR HOLDING CORPORATION

2 unchanged sentences

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

September 30, 2024

March 31, 2025

December 31, 2024

13 unchanged sentences

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

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

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

September 30, 2024

Unamortized premiums and discounts on loans, included in the total loans balances above, were $ 0.1 million at both March 31, 2025 and December 31, 2024 , and unearned income, or deferred fees, on loans was $ 0.9 million and $ 1.0 million at March 31, 2025 and December 31, 2024 , 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 March 31, 2025 and December 31, 2024 (dollars in thousands).

March 31, 2025

30 - 59 Days Past Due

35 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

September 30, 2024

The tables below provide an analysis of nonaccrual loans as of March 31, 2025 and December 31, 2024 (dollars in thousands).

March 31, 2025

Nonaccrual with No Allowance for Credit Loss

5 unchanged sentences

Commercial real estate

417 1,830 2,247

Total mortgage loans on real estate

10 unchanged sentences

Commercial real estate

4,168 123 4,291

Total mortgage loans on real estate

11 unchanged sentences

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

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

No material interest income was recognized in the consolidated statements of income on nonaccrual loans for the three months ended March 31, 2025 and 2024 .

Collateral Dependent Loans

Collateral dependent loans are loans for which the repayments, on the basis of our 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.

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 allowance for credit losses 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.

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 September 30, 2024 and December 31, 2023 .

The Company ’ s collateral dependent loans include all nonaccrual loans shown in the tables above at March 31, 2025 and December 31, 2024 .

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

24 unchanged sentences

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.

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.

2 unchanged sentences

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 our risk.

The Company manages risk by avoiding concentrations in any one business or industry.

Commercial real estate loans are primarily secured by office and industrial buildings, warehouses, retail shopping facilities and various special purpose commercial properties.

Commercial real estate loans are primarily secured by retail shopping facilities, office and industrial buildings, healthcare facilities, warehouses, and various special purpose commercial properties.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Com mercial 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.

15 unchanged sentences

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 our policy guidelines.

These loans have higher 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.

10 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

The tables below present the Company’s loan portfolio by year of origination, category, and credit quality indicator as of March 31, 2025 and December 31, 2024 (dollars in thousands).

Loans acquired are shown in the table by origination year.

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

September 30, 2024

The Company had an immaterial amount of revolving loans converted to term loans at March 31, 2025 and December 31, 2024 .

March 31, 2025

Revolving Loans

12 unchanged sentences

— 164 198 638 703 2,164 313 4,180

88 — — — 43 — — 131

Total 1-4 family

49 unchanged sentences

$ 63,818 $ 159,218 $ 207,253 $ 572,978 $ 314,561 $ 449,482 $ 339,321 $ 2,106,631

$ 149,134 $ 207,654 $ 625,297 $ 333,206 $ 239,026 $ 256,350 $ 345,179 $ 2,155,846

Current-period gross charge-offs

70 unchanged sentences

$ ( 173 ) $ ( 6 ) $ ( 144 ) $ ( 74 ) $ — $ ( 145 ) $ ( 820 ) $ ( 1,362 )

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

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

The Company had no loans that were classified as doubtful or loss at March 31, 2025 or December 31, 2024 .

INVESTAR HOLDING CORPORATION

1 unchanged sentence

Loan Participations and Sold Loans

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

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

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

Loan participations and whole loans sold to and servic ed for others are not included in the accompanying consolidated balance sheets, the balances of which we re $ 39.0 million and $ 38.2 million a t March 31, 2025 and December 31, 2024 , respectively.

The unpaid principal balances of these loans were approximatel y $ 191.2 million and $ 175.0 million at March 31, 2025 and December 31, 2024 , respectively.

Loans to Related Parties

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

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

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

Loans outstanding to such related party borrowers amounted to approximately $ 42.9 million and $ 43.6 million as of March 31, 2025 and December 31, 2024 , respectively.

No related party loans were classified as nonperforming or nonaccrual at March 31, 2025 or December 31, 2024 .

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

September 30, 2024

March 31, 2025

December 31, 2024

7 unchanged sentences

Allowance for Credit Losses

Effective January 1, 2023, the Company adopted ASU 2016 - 13, which uses the CECL accounting methodology for the allowance for credit losses.

The Company accounts for the ACL in accordance with FASB ASC Topic 326 “Financial Instruments – Credit Losses ” (“ASC 326” ) , which uses the CECL accounting methodology.

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

2 unchanged sentences

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 Company evaluates the adequacy of the allowance for credit losses on a quarterly basis.

The allowance for credit losses is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist.

For each pool of loans, the Company evaluates and applies qualitative adjustments to the calculated allowance for credit losses 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 Company evaluates the adequacy of the ACL on a quarterly basis.

The ACL is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist.

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.

Loans that do not share similar risk characteristics with other loans are excluded from the loan pools and individually evaluated for impairment.

For collateral dependent loans where the borrower is experiencing financial difficulty, which we evaluate 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 based on third party appraisals.

For 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 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 allowance for credit losses.

Provisions for credit losses and recoveries on loans previously charged off are adjustments to the allowance for credit losses.

Credits deemed uncollectible are charged to the ACL.

Provisions for credit losses and recoveries on loans previously charged off are adjustments to the ACL.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Three months ended September 30,

Nine months ended September 30,

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 loan s was $ 12.7 million and $ 12.5 million a t March 31, 2025 and December 31, 2024 , 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 three months ended March 31, 2025 and 2024 (dollars in thousands).

Three months ended March 31,

Balance, beginning of period

$ 26,721 $ 30,540

ASU 2016-13 adoption impact (1)

Provision for credit losses on loans (1)

1 unchanged sentence

( 127 ) ( 103 )

467 184 633 2,911

Balance, end of period

$ 26,435 $ 29,114

On January 1, 2023, the Company adopted ASU 2016 - 13, which introduced a new model known as CECL.

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

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

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

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

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

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

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

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

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

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

Three months ended September 30, 2024

Construction & Development

Commercial Real Estate

Commercial & Industrial

Allowance for credit losses:

Beginning balance

$ 1,492 $ 5,741 $ 1,518 $ 9 $ 12,230 $ 7,529 $ 101 $ 28,620

Provision for credit losses on loans

( 596 ) 76 ( 293 ) ( 1 ) 89 ( 200 ) 19 ( 906 )

— ( 38 ) — — — ( 17 ) ( 23 ) ( 78 )

421 3 — — — 38 5 467

Ending balance

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

Three months ended September 30, 2023

Construction & Development

Commercial Real Estate

Commercial & Industrial

Allowance for credit losses:

Beginning balance

$ 2,977 $ 9,293 $ 866 $ 3 $ 11,221 $ 5,469 $ 215 $ 30,044

Provision for credit losses on loans

18 ( 125 ) 239 — ( 252 ) ( 310 ) 13 ( 417 )

— — — — ( 1 ) 1 ( 33 ) ( 33 )

5 4 — — 12 137 26 184

Ending balance

$ 3,000 $ 9,172 $ 1,105 $ 3 $ 10,980 $ 5,297 $ 221 $ 29,778

For the three months ended March 31, 2025 , the $ 3.6 million negative provision for credit losses on the consolidated statement of income includes a $ 3.7 million negative provision for loan losses and a $ 0.1 million provision for unfunded loan commitments.

For the three months ended March 31, 2024 , the $ 1.4 negative provision for credit losses on the consolidated statement of income includes a $ 1.4 million negative provision for loan losses and a $ 9,000 negative provision for unfunded loan commitments.

The negative provision for credit losses for the three months ended March 31, 2025 was primarily due to net recoveries on one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida .

The negative provision for credit losses for the three months ended March 31, 2024 was primarily due to a decrease in total loans, aging of existing loans, and, to a lesser extent, the completion of the annual CECL allowance model recalibration, which resulted in lower historical loss rates.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Nine months ended September 30, 2024

The following tables outline the activity in the ACL by collateral type for the three months ended March 31, 2025 and 2024 , and show both the allowance and portfolio balances for loans individually and collectively evaluated for impairment as of March 31, 2025 and 2024 (dollars in thousands).

Three months ended March 31, 2025

Construction & Development

21 unchanged sentences

$ 149,275 $ 394,735 $ 103,248 $ 6,718 $ 931,868 $ 510,765 $ 10,022 $ 2,106,631

Nine months ended September 30, 2023

Three months ended March 31, 2024

Construction & Development

4 unchanged sentences

$ 2,471 $ 9,129 $ 1,124 $ 2 $ 10,691 $ 6,920 $ 203 $ 30,540

ASU 2016-13 adoption impact

( 75 ) 4,712 ( 84 ) ( 99 ) 676 793 ( 58 ) 5,865

Provision for credit losses on loans

16 unchanged sentences

Loan Modifications to Borrowers Exper iencing 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, or a term extension, excluding covenant waivers and modification of contingent acceleration clauses, or a combination of such concessions.

When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

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

During the three months ended March 31, 2025 and 2024 , the Company did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BORROWINGS UNDER BANK TERM FUNDING PROGRAM

On March 12, 2023, the Federal Reserve established the BTFP.

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

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

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

STOCKHOLDERS ’ EQUITY

Accumulated Other Comprehensive (Loss) Income

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

Three months ended September 30,

Beginning of Period

End of Period

Beginning of Period

End of Period

Unrealized (loss) gain, available for sale, net

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

Reclassification of realized gain, available for sale, net

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

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

Accumulated other comprehensive (loss) income

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

Nine months ended September 30,

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

Three months ended March 31,

Beginning of Period

2 unchanged sentences

End of Period

Unrealized (loss) gain, available for sale, net

Unrealized (loss) gain, AFS, net

$ ( 43,432 ) $ 5,478 $ ( 37,954 ) $ ( 39,627 ) $ ( 3,810 ) $ ( 43,437 )

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

Reclassification of realized gain, AFS, net

( 4,926 ) — ( 4,926 ) ( 5,521 ) — ( 5,521 )

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

Unrealized gain, transfer from AFS to HTM, net

Accumulated other comprehensive (loss) income

2 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

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

The Plan is administered by the Compensation Committee of the Company’s board of directors, which determines, within the provisions of the Plan, those eligible employees to whom, and the times at which, equity awards will be granted.

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

Stock Options

The Company uses a Black-Scholes option pricing model to estimate the fair value of stock-based awards.

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.

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

Dividend yield

Expected volatility

Risk-free interest rate

Expected term (in years)

Weighted average grant date fair value

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

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

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

Nine months ended September 30,

Number of Options

Weighted Average Exercise Price

Number of Options

Weighted Average Exercise Price

Outstanding, beginning of period

326,605 $ 17.32 350,430 $ 17.89

29,997 16.35 34,497 13.96

( 96,000 ) 14.16 ( 7,500 ) 14.00

Outstanding, end of period

260,602 $ 18.37 377,427 $ 17.61

Exercisable, end of period

174,872 $ 19.15 295,669 $ 17.57

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock and RSUs

Under the Plan, the Company may grant restricted stock, RSUs, and other stock-based awards to Plan participants, subject to forfeiture upon the occurrence of certain events until the vesting dates specified in the participant’s award agreement.

Historically, the Company granted restricted stock awards to Plan participants.

Beginning in 2019, the Company began granting time vested RSUs to its non-employee directors and certain officers of the Company instead, with vesting terms ranging from two years to five years.

The RSUs do not have voting rights and do not receive dividends or dividend equivalents.

As of May 1, 2023, all of the previously granted shares of restricted stock had vested and only outstanding RSUs remain.

Compensation expense for restricted stock and 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 shares or 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 restricted stock and RSUs, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the consolidated statements of income.

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

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

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

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

Nine months ended September 30,

Weighted Average Grant Date Fair Value

Balance, beginning of period

336,749 $ 17.37 253,488 $ 20.19

110,886 16.41 168,205 14.95

( 25,266 ) 17.06 ( 6,675 ) 20.80

Earned and issued

( 96,855 ) 18.84 ( 82,294 ) 20.41

Balance, end of period

325,514 $ 16.63 332,724 $ 17.47

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

2 unchanged sentences

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 September 30, 2024 or December 31, 2023 associated with the swap contracts, other than interest rate swaps related to customer loans, described below.

There were no assets or liabilities recorded in the accompanying consolidated balance sheets at March 31, 2025 or December 31, 2024 associated with the swap contracts, other than interest rate swaps related to customer loans, described below.

Customer Derivatives – Interest Rate Swaps

2 unchanged sentences

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.

The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815” ) , 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 three and nine months ended September 30, 2024 and 2023 .

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

The Company did not recognize any net gains or losses in other operating income resulting from fair value adjustments of these swap agreements during the three months ended March 31, 2025 and 2024 .

Derivative Assets (2)

Derivative Liabilities (2)

September 30, 2024

March 31, 2025

Interest rate swaps

3 unchanged sentences

$ 373,845 $ 17,195 $ 17,195

( 1 ) Notional amounts represent interest rate swap contracts with customers and offsetting interest rate swap contracts with other financial institutions.

( 1 ) At March 31, 2025 the Company had notional amounts of $ 183.3 million in interest rate swap contracts with customers and $ 183.3 million in offsetting interest rate swap contracts with other financial institutions.

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.

( 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.

13 unchanged sentences

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

At March 31, 2025 and December 31, 2024 , the fair values of these investments were $ 3.9 million and $ 3.8 million, respectively, and are included in “Other assets” in the accompanying consolidated balance sheets.

Fair Value Hierarchy

19 unchanged sentences

as well as other reference data.

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

At March 31, 2025 and December 31, 2024 , 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.

6 unchanged sentences

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

September 30, 2024

March 31, 2025

Obligations of the U.S.

37 unchanged sentences

$ 17,195 $ — $ 17,195 $ —

INVESTAR HOLDING CORPORATION

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

The tables below provide a reconciliation for assets measured at fair value on a recurring basis using significant unobservable inputs, or level 3 inputs, for the three months ended March 31, 2025 and 2024 (dollars in thousands).

Obligations of State and Political Subdivisions

3 unchanged sentences

Realized gain (loss) included in earnings

Unrealized (loss) gain included in other comprehensive income

Unrealized gain included in other comprehensive income

Maturities, prepayments, and calls

1 unchanged sentence

Transfers out of level 3

Balance at September 30, 2024

Balance at March 31, 2025

$ 3,476 $ 495

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Obligations of State and Political Subdivisions

3 unchanged sentences

Realized gain (loss) included in earnings

Unrealized loss included in other comprehensive loss

( 764 ) ( 31 )

Unrealized (loss) gain included in other comprehensive loss

Maturities, prepayments, and calls

1 unchanged sentence

Transfers out of level 3

Balance at September 30, 2023

Balance at March 31, 2024

$ 4,474 $ 469

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

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

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

There were no liabilities measured at fair value on a recurring basis using level 3 inputs at March 31, 2025 and December 31, 2024 .

For the three months ended March 31, 2025 and 2024 , 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 March 31, 2025 and December 31, 2024 (dollars in thousands).

Estimated Fair Value

2 unchanged sentences

Range of Discounts

September 30, 2024

March 31, 2025

Obligations of state and political subdivisions

16 unchanged sentences

( 1 ) Fair values determined through valuation analysis using coupon, yield (discount margin), liquidity and expected repayment dates.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis

4 unchanged sentences

Individually evaluated loans that are not collateral dependent are evaluated based on a discounted cash flow methodology.

Credits deemed uncollectible are charged to the allowance for credit losses.

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.

These properties are initially recorded at fair value at the time of foreclosure, less estimated selling cost.

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

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.

1 unchanged sentence

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

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

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

Quantitative information about assets measured at fair value on a nonrecurring basis based on significant unobservable inputs (level 3 ) is summarized below as of March 31, 2025 and December 31, 2024 .

There were no liabilities measured on a nonrecurring basis at March 31, 2025 or December 31, 2024 (dollars in thousands).

Estimated Fair Value

3 unchanged sentences

Weighted Average Discount (3)

September 30, 2024

March 31, 2025

Loans individually evaluated for impairment (1)

2 unchanged sentences

Collateral discounts and estimated costs to sell

Other real estate owned (2)

900 Underlying collateral value, third party appraisals

Collateral discounts and discount rates

December 31, 2024

3 unchanged sentences

Collateral discounts and estimated costs to sell

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

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

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

Other real estate owned (2)

900 Underlying collateral value, third party appraisals

Collateral discounts and discount rates

( 1 ) Loan s individually evaluated for impairment that were re-measured during the period had a carrying value of $ 2.0 million and $ 2.4 million at March 31, 2025 and December 31, 2024 , respectively, with related ACL of $ 0.3 million and $ 0.2 million, respectively, as o f s uch dates.

( 2 ) Other real estate owned that was re-measured during the period had a carrying value of $ 0.9 million at December 31, 2024 .

During the three months ended March 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.

26 unchanged sentences

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 are summarized in the table below as of the dates indicated (dollars in thousands).

September 30, 2024

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

March 31, 2025

Carrying Amount

20 unchanged sentences

1,910,622 1,821,769 — — 1,821,769

Borrowings under BTFP and repurchase agreements

Repurchase agreements

11,302 11,302 — 11,302 —

7 unchanged sentences

15,073 15,073 — 15,073 —

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

21 unchanged sentences

1,913,801 1,826,868 — — 1,826,868

Borrowings under BTFP and repurchase agreements

FHLB short-term advances and repurchase agreements

15,591 15,577 — 15,577 —

7 unchanged sentences

17,195 17,195 — 17,195 —

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Income tax expense

2 unchanged sentences

18.4 % 22.7 %

third quarter of

2024, the Company revised its estimated

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

fourth quarter of approximately

$ 3.1 million upon receipt of death benefit proceeds.

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

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

For the three months ended

September 30, 2024

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

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

nine months ended September 30, 2024

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

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

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

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

For the three months ended March 31, 2025 , the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

For the three months ended March 31, 2024 , the effective tax rate differed from the statutory tax rate of 21% primarily due to the surrender of approximately $ 8.4 million of BOLI contracts, which resulted in $ 0.3 million of income tax expense, partially offset by tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

COMMITMENTS AND CONTINGENCIES

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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 allowance for credit losses on loans.

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

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

The reserve for unfunded loan commitments was $ 0.1 million and $ 42,000 at March 31, 2025 and December 31, 2024 , respectively, and is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets.

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

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

September 30, 2024

March 31, 2025

December 31, 2024

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Standby letters of credit

15,338 17,844

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

Additionally, at March 31, 2025 , the Company had unfunded commitments of $ 0.9 million for its investments in SBIC qualified funds and other investment funds.

INVESTAR HOLDING CORPORATION

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

The Company determines if an arrangement is a lease at inception.

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.

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate 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.

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 nine months ended September 30, 2024 and 2023 (dollars in thousands).

September 30,

Quantitative information regarding the Company’s operating leases is presented below as of and for the three months ended March 31, 2025 and 2024 (dollars in thousands).

Total operating lease cost

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Weighted-average discount rate

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

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

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

At March 31, 2025 and December 31, 2024 , the Company’s operating lease ROU assets were $ 2.1 million and $ 2.0 million, respectively, and the Company’s related operating lease liabilities were $ 2.1 million.

The Company’s operating leases have remaining terms ranging from approximately three 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 March 31, 2025 are presented below (dollars in thousands).

Remainder of 2025

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

At March 31, 2025 , the Company had not entered into any material leases that have not yet commenced.

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

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All tenant leases are operating leases.

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

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

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

SUBSEQUENT EVENTS

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

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

The Bank, as lessor, recognized lease income of $ 0.1 million for both the three month periods ended March 31, 2025 and 2024 .

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

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These factors include, but are not limited to, the following, any one or more of which could materially affect the outcome of future events:

the significant risks and uncertainties for our business, results of operations and financial condition, as well as our regulatory capital and liquidity ratios and other regulatory requirements caused by business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate, including heightened uncertainties resulting from recent changing trade and tariff policies that could have an adverse impact on inflation and economic growth at least in the near term;

changes in inflation, interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;

our ability to continue to successfully execute the pivot of our near-term strategy from primarily a growth strategy to a strategy primarily focused on consistent, quality earnings through the optimization of our balance sheet, and our ability to successfully execute a long-term growth strategy;

our ability to successfully execute our near-term strategy to pivot from primarily a growth strategy to a strategy primarily focused on consistent, quality earnings through the optimization of our balance sheet, and our ability to successfully execute a long-term growth strategy;

our ability to achieve organic loan and deposit growth, and the composition of that growth;

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our ability to identify and enter into agreements to combine with attractive acquisition candidates, finance acquisitions, complete acquisitions after definitive agreements are entered into, and successfully integrate and grow acquired operations;

our adoption on January 1, 2023 of ASU 2016-13, and inaccuracy of the assumptions and estimates we make in establishing reserves for credit losses and other estimates;

inaccuracy of the assumptions and estimates we make in establishing reserves for credit losses and other estimates;

changes in the quality or composition of our loan portfolio, including adverse developments in borrower industries or in the repayment ability of individual borrowers;

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new or increasing geopolitical tensions, including resulting from wars in Ukraine and Israel and surrounding areas;

the emergence or worsening of widespread public health challenges or pandemics including COVID-19;

the emergence or worsening of widespread public health challenges or pandemics;

concentration of credit exposure;

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“Risk Factors” and Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Special Note Regarding Forward-Looking Statements” in the Company’s Annual Report and in Part II.

“MD&A – Cautionary Note Regarding Forward-Looking Statements” in the Company’s Annual Report and in Part II.

“Risk Factors” of this report.

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We expressly disclaim any obligation or undertaking to update our forward-looking statements, and we do not intend to release publicly any updates or changes in our expectations concerning the forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based, except as required by law.

All cross-references to the “Notes” in this Form 10-Q refer to the Notes to Consolidated Financial Statements contained in Part I Item 1.

Financial Statements .

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, income and expenses and related disclosure of contingent assets and liabilities.

Although independent third parties are often engaged to assist us in the estimation process, management evaluates the results, challenges assumptions used and considers other factors which could impact these estimates.

Actual results may differ from these estimates under different assumptions or conditions.

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are significant accounting policies and developing critical accounting estimates, which are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

We believe that the judgments, estimates and assumptions that we use in the preparation of our consolidated financial statements are appropriate.

For more detailed information about our accounting policies, please refer to Note 1.

Summary of Significant Accounting Policies of our Annual Report.

Company Overview

This section presents management’s perspective on the consolidated financial condition and results of operations of the Company and its wholly-owned subsidiary, Investar Bank, National Association.

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included herein, and the audited consolidated financial statements for the year ended December 31, 2023 , including the notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report.

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included herein, and the audited consolidated financial statements for the year ended December 31, 2024 , including the notes thereto, and the related MD&A in the Annual Report.

All cross-references to the “Notes” in this Form 10-Q refer to the Notes to Consolidated Financial Statements contained in Part I.

Financial Statements unless otherwise noted .

Through the Bank, we provide full banking services, excluding trust services, tailored primarily to meet the needs of individuals, professionals, and small to medium-sized businesses.

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

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

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

At March 31, 2025 , we operated 29 full service branches comprised of 20 full service branches in Louisiana, three full service branches in Texas, and six full service branches in Alabama.

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

On July 1, 2019, the Bank changed from a Louisiana state bank charter to a national bank charter and its name changed to Investar Bank, National Association.

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Our strategy includes a focus on originating and renewing high quality, primarily variable-rate, loans and allowing higher risk credit relationships to run off.

We have kept duration short on our liabilities to provide flexibility to secure lower cost funding that was accretive to our net interest margin.

Our near-term strategy includes continuing to consider acquisitions on an opportunistic basis.

Our long-term strategy includes organic growth through high quality loans and growth through acquisitions, including whole-bank acquisitions, strategic branch acquisitions and asset acquisitions.

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Our most recent whole bank acquisition was completed in April 2021.

During our last three fiscal years, we have not opened any de novo branch locations;

however, in the third quarter of 2023, we converted an existing loan and deposit production office in Tuscaloosa, Alabama to a cashless branch designed to provide a digital banking experience.

During the second half of 2023, we purchased commercial and industrial revolving lines of credit with an unpaid principal balance of $162.7 million.

We opened a loan and deposit production office in our Texas market in the first quarter of 2024 and converted it to a full-service branch location in the fourth quarter of 2024.

We have continued to evaluate opportunities to improve our branch network efficiency, leverage our digital initiatives, and further reduce costs.

We closed five branches during our last three fiscal years, and one in Alabama during the first quarter of 2024.

Three of the branches had been acquired, and the closures involved anticipated synergies that resulted in significant cost savings.

In 2022, we sold five former branch locations and three tracts of land that were being held for future branch locations.

On January 27, 2023, we completed the sale of certain assets, deposits and other liabilities associated with our Alice, Texas and Victoria, Texas branch locations in order to focus more on our core markets.

Of the Bank’s entire branch network, these two locations were geographically the most distant from our Louisiana headquarters.

During the third quarter of 2023, we ceased operation of 14 ATMs .

During 2024, we began to reinvest within our geographic areas, particularly in our Texas markets, including through a lease of a loan production office in the southeast Texas market and strategic hires .

In an effort to focus more on our core business and optimize profitability, in the third quarter of 2023, we made the strategic decision to exit the consumer mortgage origination business.

Consumer mortgage loan products are typically long-term and fixed-rate and generally require a higher relative allowance for credit losses than other loan products.

Consumer mortgage volumes have decreased to historical lows due to the combination of higher housing prices and interest rates and constriction of housing supply.

As a result of this decision, we further optimized our workforce and will continue to dedicate resources to our more profitable business lines.

Substantially all of the consumer mortgage portfolio is included in the 1-4 family loan category.

We closed one branch in our Alabama market during the first quarter of 2024.

Our principal business is lending to and accepting deposits from individuals and small to medium-sized businesses in our areas of operation.

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Changing Inflation and Interest Rates .

During the entirety of 2021, the federal funds target rate was 0% to 0.25%, and it remained at that rate until March 2022.

Inflation increased rapidly during 2021 through June 2022.

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

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

After June 2022, the rate of inflation generally declined although it has remained above the Federal Reserve’s target inflation rate of 2%.

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

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

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

During 2023, the Federal Reserve raised the federal funds target rate four times, from 4.25% to 4.50%, to 5.25% to 5.50%.

During 2024, beginning in September 2024, the Federal Reserve reduced the federal funds target rate three times by 100 basis points on a cumulative basis to 4.25% to 4.50%.

Accordingly, the prevailing federal funds target rate in first quarter 2025 was 100 basis points lower than in first quarter 2024.

Disruptions in the Banking Industry .

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

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

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

During the third quarter of 2024, we began paying down borrowings under the BTFP and repaid all of the remaining borrowings under the BTFP in the fourth quarter of 2024 .

As of March 31, 2025 , estimated uninsured deposits represented approximately 34% of our total deposits.

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

Risk Factors.

On April 26, 2024, regulators seized Republic First Bancorp, which had approximately $6.0 billion in total assets and estimated uninsured deposits of approximately 60%, and sold its assets to another financial institution, reportedly due to a decline in deposits and in the value of its mortgage loan portfolio.

Adoption of ASU 2016-13.

We adopted ASU 2016-13 on January 1, 2023, and recorded a one-time, cumulative effect adjustment that increased the allowance for credit losses by $5.9 million and decreased retained earnings, net of tax, by $4.3 million.

Loan Purchase Agreement.

In August 2023, we entered into a loan purchase agreement to acquire commercial and industrial revolving lines of cre dit, and related accrued interest, wi th an unpaid principal balance of $162.7 million and total commitments of $237.8 million in two tranches.

The first and second tranches consisted of unpaid principal balances of $35.8 million and $127.0 million, respectively, and total commitments of $61.1 million and $176.7 million, respectively.

The purchase of the first tranche was completed on September 15, 2023, and the purchase of the second tranche was completed on October 3, 2023.

The revolving lines of credit are variable-rate and shorter-term in nature with varying renewal terms.

The loans are to consumer finance lending companies that possess a history of high credit quality and that we believe provide us with opportunities to deepen the relationships through our services such as treasury management.

We also hired two individuals with significant experience in lending in this area.

Sale of Two Branches to First Community Bank.

On January 27, 2023, we completed the sale of certain assets, deposits and other liabilities associated with the Alice and Victoria, Texas locations to First Community Bank, a Texas state bank located in Corpus Christi, Texas.

We sold approximately $13.9 million in loans and $14.5 million in deposits.

Exit from Consumer Mortgage Origination Busines s .

In the third quarter of 2023, we made the strategic decision to exit the consumer mortgage origination business.

For additional discussion, see “Company Overview.”

Branch Closures.

We closed one branch in Central, Louisiana in March 2023 and one branch in Anniston, Alabama in January 2024.

COVID-19 Pandemic.

The COVID-19 pandemic and related governmental control measures severely disrupted financial markets and overall economic conditions in 2020 and 2021.

While the impact of the pandemic and the associated uncertainties remained in 2022 and 2023, there was significant progress made with COVID-19 vaccination levels, which resulted in the easing of restrictive measures in the U.S.

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

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

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

We closed one branch in Anniston, Alabama in January 2024.

Subordinated Debt Repurchases.

During the first quarter of 2024, we repurchased $1.0 million in principal amount of our 5.125% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “2032 Notes” ).

During the second quarter of 2024, we repurchased $5.0 million in principal amount of our 5.125% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes” ) and $2.0 million in principal amount of our 2032 Notes.

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

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

Subordinated Debt Redemption.

During the fourth quarter of 2024, we redeemed all of the remaining $20.0 million in principal amount of the 2029 Notes.

As of March 31, 2025 and December 31, 2024 our outstanding subordinated debt consisted of $17.0 million in principal amount of our 2032 Notes.

BOLI Restructuring.

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

Legal Settlement.

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

BOLI Death Benefit Proceeds.

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

Hurricane Ida .

During the first quarter of 2025, we recorded a $3.3 million recovery of loans previously charged off as a result of a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida, and we also recorded related noninterest expense of $0.2 million.

Since the third quarter of 2021 when we recorded an impairment charge of $21.6 million related to this relationship.

As of March 31, 2025 , we have recorded total recoveries on the relationship of approximately $7.8 million consisting of net recoveries of $6.0 million of loans previously charged off, noninterest income from a legal settlement of $1.1 million, and a gain on sale of other real estate owned of $0.7 million.

At March 31, 2025 , our other real estate owned related to this relationship included two remaining properties with a total cost basis of $1.7 million, which we are actively marketing for sale.

Upon sale of these properties, we will have arrived at final resolution of this loan relationship.

Overview of Financial Condition and Results of Operations

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

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

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

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

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

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

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

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

At September 30, 2024 , the Company and Bank each were in compliance with all regulatory capital requirements, and the Bank was considered “well-capitalized” under the FDIC’s prompt corrective action regulations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For the three months ended March 31, 2025 , net income was $6.3 million, or $0.63 per diluted common share, compared to net income of $4.7 million, or $0.48 , per diluted common share for the three months ended March 31, 2024 .

Net income increased primarily due to a negative provision for credit losses of $3.6 million in the three months ended March 31, 2025 as a result of a $3.3 million recovery of loans previously charged off following a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida, compared to a negative provision for credit losses of $1.4 million for the comparable prior period.

Also contributing to the increase in net income was a $1.1 million increase in net interest income, which was a result of a $2.4 million decrease in interest expense partially offset by a $1.3 million decrease in interest income.

We experienced margin expansion as our cost of funds decreased and our yield on interest-earning assets increased.

There was also a $0.9 million increase in noninterest expense and a $0.7 million decrease in noninterest income.

The increase in noninterest expense was primarily due to increases in salaries and employee benefits and other operating expenses.

In addition, first quarter 2024 noninterest expense was reduced by a $0.2 million gain on early extinguishment of subordinated debt.

The decrease in noninterest income is mainly attributable to a gain on sale or disposition of fixed assets of $0.4 million recorded during the three months ended March 31, 2024 primarily resulting from the closure of one branch in the Alabama market, and a decrease in other operating income .

At March 31, 2025 , the Company and Bank each were in compliance with all regulatory capital requirements, and the Bank was considered “well-capitalized” under the FDIC’s prompt corrective action regulations.

Other key components of our performance for the three months ended March 31, 2025 are summarized below.

During the three months ended March 31, 2025 , our net interest margin was 2.87% , compared to 2.59% for the three months ended March 31, 2024 .

Credit quality metrics improved as nonperforming loans were 0.27% of total loans at March 31, 2025 compared to 0.42% at December 31, 2024 .

Return on average assets increased to 0.94% for the three months ended March 31, 2025 , compared to 0.68% for the three months ended March 31, 2024 .

Return on average equity was 10.31% for the three months ended March 31, 2025 , compared to 8.28% for the three months ended March 31, 2024 .

Book value per common share reached a record high of $25.63 at March 31, 2025 compared to $24.55 at December 31, 2024 .

Total deposits increased $1.4 million, or 0.1% , to $2.35 billion at March 31, 2025 , compared to $2.35 billion at December 31, 2024 .

Total deposits, excluding $47.3 million of brokered demand deposits at December 31, 2024, increased $48.7 million, or 2.1%, to $2.35 billion at March 31, 2025, compared to $2.30 billion at December 31, 2024.

Noninterest-bearing deposits increased $4.6 million, or 1.1% , to $436.7 million at March 31, 2025 , compared to $432.1 million at December 31, 2024 .

As of March 31, 2025 , estimated uninsured deposits represented approximately 34% of our total deposits.

Consistent with our strategy of optimizing the balance sheet, t otal loans decreased $18.5 million, or 0.9% , to $2.11 billion at March 31, 2025 , compared to $2.13 billion at December 31, 2024 .

Net interest income for the three months ended March 31, 2025 was $18.3 million, an increase of $1.1 million, or 6.6% , compared to $17.2 million for the three months ended March 31, 2024 , driven primarily by a decrease in the volume of short-term borrowings, partially offset by a decrease in the volume of loans.

During the three months ended March 31, 2025 , we paid $0.6 million to repur chase 34,992 shares of common stock, compared to $0.2 million to repurchase 10,525 shares of common stock during the three months ended March 31, 2024 .

We paid $1.0 million in cash dividends on our common stock during both the three month periods ended March 31, 2025 and 2024 .

Accumulated other comprehensive loss d ecreased $5.5 million, or 11.3% , to $42.9 million at March 31, 2025 , compared to $48.4 million at December 31, 2024 primarily due to an increase in the fair value of our AFS securities portfolio.

Discussion and Analysis of Financial Condition

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

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

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

Loans constitute our most significant asset, comprising 77% and 78% of our total assets at March 31, 2025 and December 31, 2024 , respectively.

Total loans decreased $18.5 million, or 0.9% , to $2.11 billion at March 31, 2025 , compared to $2.13 billion at December 31, 2024 .

The decrease in loans was primarily the result of lower utilization of credit lines and loan amortization.

Given the high interest rate environment, we are emphasizing origination of high margin loans that promote long-term profitability and proactively exiting credit relationships that do not fit this strategy.

Our variable-rate loans as a percentage of total loans was 32% at March 31, 2025 and December 31, 2024.

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

September 30, 2024

March 31, 2025

December 31, 2024

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

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

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

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

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

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

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

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

At March 31, 2025 , the Company’s business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $960.7 million, a decrease of $15.5 million, or 1.6% , compared to $976.2 million at December 31, 2024 .

The decrease in the business lending portfolio is primarily driven by reduced utilization of credit lines, particularly on commercial and industrial relationships.

Nonowner-occupied loans totaled $481.9 million at March 31, 2025, a decrease of $13.4 million, or 2.7%, compared to $495.3 million at December 31, 2024.

The decrease in nonowner-occupied loans is primarily due to loan amortization and payoffs that aligned with our continued strategy to optimize and de-risk the mix of the portfolio.

Construction and development loans totaled $149.3 million at March 31, 2025, a decrease of $5.3 million, or 3.4%, compared to $154.6 million at December 31, 2024.

The decrease in construction and development loans is primarily due to conversions to permanent loans upon completion of construction.

During the third quarter of 2023 we exited the consumer mortgage loan origination business to transition into shorter duration, higher risk-adjusted return asset classes, in an effort to focus more on our core business and optimize profitability.

The consumer mortgage portfolio was approximately $237.6 million and $242.5 million at March 31, 2025 and December 31, 2024, respectively, substantially all of which is included in the 1-4 family category.

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

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

Loan Concentrations .

Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions.

At March 31, 2025 and December 31, 2024 , we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above.

The table below sets forth the balance of owner-occupied loans by industry based on NAICS code and nonowner-occupied loans by property type as of the dates presented (dollars in thousands).

March 31, 2025

December 31, 2024

Percentage of Total

Owner-Occupied

Wholesale trade

Healthcare and social assistance

Other services (except public administration)

Accommodation and food services

All other (1)

Total owner-occupied

Nonowner-Occupied

Total nonowner-occupied

Total commercial real estate

No individual category within “All other” represents more than 2% of total owner-occupied loans.

The following table sets forth loans outstanding at

March 31, 2025

, which, based on remaining scheduled repayments of principal, are due in the periods indicated.

Loans with balloon payments and longer amortizations are often repriced and extended beyond the initial maturity when credit conditions remain satisfactory.

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Commercial and industrial

Loan Concentrations .

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

Investment Securities

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

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

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

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

Investment securities represented 14% of our total assets and totaled $388.0 million at March 31, 2025 , an increase of $14.2 million, or 3.8% , from $373.8 million at December 31, 2024 .

The increase in investment securities at March 31, 2025 compared to December 31, 2024 was driven primarily by a $13.3 million increase in residential mortgage-backed securities, a $1.2 million increase in corporate bonds and a $1.1 million increase in commercial mortgage-backed securities, partially offset by a $1.1 million decrease in obligations of state and political subdivisions.

Net unrealized losses in our AFS investment securities portfolio decreased to $54.5 million at March 31, 2025 compared to $61.4 million at December 31, 2024 primarily due to lower prevailing market interest rates.

For additional information, see Note 3.

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

September 30, 2024

March 31, 2025

December 31, 2024

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

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

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

As of March 31, 2025 , AFS securities comprised 89% of our total investment securities.

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

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

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

The table below sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio at March 31, 2025 (dollars in thousands).

One Year or Less

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The maturity of mortgage-backed securities reflects scheduled repayments based upon the contractual maturities of the securities.

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

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

September 30, 2024

Weighted average yields on tax-exempt securities are calculated based on amortized cost on a fully tax equivalent basis assuming a federal tax rate of 21%, when applicable.

The following table sets forth the composition of our deposits and the percentage of each deposit type to total deposits at March 31, 2025 and December 31, 2024 (dollars in thousands).

March 31, 2025

December 31, 2024

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Money market deposits

Brokered demand deposits

Savings deposits

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Total deposits

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

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

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

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

Total deposits were $2.35 billion at March 31, 2025 , an increase of $1.4 million, or 0.1% , compared to $2.35 billion at December 31, 2024 .

There were no brokered demand deposits at March 31, 2025, compared to $47.3 million at December 31, 2024.

We utilize brokered demand deposits when pricing is more favorable than other short-term borrowings.

The increase in noninterest-bearing demand deposits, interest-bearing demand deposits, money market deposits, and savings deposits at March 31, 2025 compared to December 31, 2024 is primarily the result of organic growth.

The decrease in time deposits at March 31, 2025 compared to December 31, 2024 is primarily due to maturities of higher cost time deposits as a result of our strategy to keep duration short.

Brokered time deposits decreased to $244.9 million at March 31, 2025 from $245.5 million at December 31, 2024.

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

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

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

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

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

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

At March 31, 2025, the balance of brokered time deposits remained below 10% of total assets, and the remaining weighted average duration was approximate ly six months with a weighted average rate o f 4.78%.

At March 31, 2025, our estimated uninsured deposits were $803.7 million, or approximately 34% of total deposits, compared to $737.6 million, or approximately 31% of our total deposits at December 31, 2024.

The estimates are based on the same methodologies and assumptions used for our regulatory reporting requirements.

The insured deposit data does not reflect an evaluation of all of the account ownership category distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

At March 31, 2025 , total borrowings include securities s old under agreements to repurchase, FHLB advances, subordinated debt issued in 2022, an d junior subordinated debentures assumed through acquisitions.

We had $11.3 million of securities sold under agreements to repurchase at March 31, 2025 and $8.4 million at December 31, 2024 .

Our advances from the FHLB were $60.0 million at March 31, 2025 , a decrease of $7.2 million, compared to FHLB advances of $67.2 million at December 31, 2024 .

Based on original maturities, at March 31, 2025 , all of our FHLB advances were long-term, compared to $7.2 million short-term and $60.0 million long-term FHLB advances at December 31, 2024 .

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

On March 12, 2023, the Federal Reserve established the BTFP.

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

The BTFP was a one-year program which provided additional liquidity through borrowings for a term of up to one year secured by the pledging of certain qualifying securities and other assets valued at par.

Beginning in the second quarter of 2023, we utilized the BTFP to secure fixed rate funding for a one-year term and reduce short-term FHLB advances, which are priced daily.

We utilized this source of funding due to its lower rate and the ability to prepay the obligations without penalty.

The rates on the borrowings under the BTFP are fixed for one year from the day each borrowing is made.

The rates on the borrowings under the BTFP were fixed for one year from the day each borrowing was made.

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

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

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

During the third quarter of 2024, we began paying down borrowings under the BTFP and repaid all of the remaining borrowings under the BTFP in the fourth quarter of 2024.

At March 31, 2025 and December 31, 2024, we had no outstanding borrowings under the BTFP.

Typically, the main source of our short-term borrowings are advances from the FHLB ;

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

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

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

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

Average Balances

however, during the three months ended March 31, 2024, our primary source of short-term borrowings were borrowings under the BTFP due to more favorable rates.

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

As previously discussed, the Federal Reserve target rate was 5.25% to 5.50% during first quarter 2024 compared to 4.25% to 4.50% during first quarter 2025.

The average balances and cost of short-term borrowings for the three months ended March 31, 2025 and 2024 are summarized in the table below (dollars in thousands).

Average Balances

Cost of Short-term Borrowings

Three months ended September 30,

Nine months ended September 30,

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Federal funds purchased and short-term FHLB advances

Borrowings under BTFP

Securities sold under agreements to repurchase

Repurchase agreements

Total short-term borrowings

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

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

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

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

“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Discussion and Analysis of Financial Condition – Borrowings – 2032 Notes and 2029 Notes” a nd Note 10 to the financial statements included in such report.

The carrying value of the subordinated debt, which consists entirely of our 2032 Notes, was $16.7 million at March 31, 2025 and December 31, 2024 .

The $8.8 million and $8.7 million in junior subordinated debt at March 31, 2025 and December 31, 2024 , respectively, represent the junior subordinated debentures that we assumed through acquisitions.

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

“MD&A – Discussion and Analysis of Financial Condition – Borrowings – 2032 Notes” a nd Note 10 to the financial statements included in such report.

Stockholders ’ Equity

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

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

Stockholders’ equity was $251.7 million at March 31, 2025 , an increase of $10.4 million compared to December 31, 2024 .

The increase is primarily attributable to $6.3 million of net income for the three months ended March 31, 2025 and a $5.5 million decrease in accumulated other comprehensive loss due to an increase in the fair value of the Bank’s AFS securities portfolio, partially offset by $1.0 million in dividends declared and $0.6 million for share repurchases.

Results of Operations

Net Interest Income and Net Interest Margin

Net interest income, our principal source of earnings, is the difference between the interest income generated by interest-earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets.

Factors affecting the level of net interest income include the volume of interest-earning assets and interest-bearing liabilities, yields earned on loans and investments and rates paid on deposits and other borrowings, the level of nonperforming loans, the amount of noninterest-bearing liabilities supporting interest-earning assets, and the interest rate environment.

Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets.

Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments and rates paid on deposits and other borrowings, the level of nonperforming loans, the amount of noninterest-bearing liabilities supporting earning assets, and the interest rate environment.

Net interest margin is the ratio of net interest income to average interest-earning assets.

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

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

The Federal Reserve increased the federal funds target rate four times during 2023, from 4.25% to 4.50%, to 5.25% to 5.50%.

During 2024, beginning in September, the Federal Reserve reduced the federal funds target rate three times by 100 basis points on a cumulative basis to 4.25% to 4.50%.

Accordingly, the prevailing federal funds target rate in first quarter 2025 was 100 basis points lower than in first quarter 2024.

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

Three months ended September 30, 2024 vs.

three months ended September 30, 2023 .

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

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

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

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

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

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

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

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

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

Average noninterest-bearing deposits decreased $29.4 million.

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

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

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

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

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

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

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

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

An increase in interest expense of $0.8 million resulted from an increase in volume of interest-bearing liabilities, primarily brokered time deposits.

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

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

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

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

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

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

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

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

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

Average Balances and Yields .

The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or paid and the average yield or rate paid on each such category for the three months ended September 30, 2024 and 2023 .

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

Three months ended September 30,

Yield/ Rate (1)

Interest-earning assets:

Interest-earning balances with banks

Total interest-earning assets

Cash and due from banks

Intangible assets

Allowance for credit losses

Liabilities and stockholders’ equity

Interest-bearing liabilities:

Interest-bearing demand deposits

Savings deposits

Brokered time deposits

Time deposits

Total interest-bearing deposits

Short-term borrowings (2)

Long-term debt

Total interest-bearing liabilities

Noninterest-bearing deposits

Other liabilities

Stockholders’ equity

Total liabilities and stockholders’ equity

Net interest income/net interest margin

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

Interest expense is expressed as a percentage of average interest-bearing liabilities for the indicated periods.

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

Three months ended September 30, 2024 vs.

Three months ended September 30, 2023

Interest income:

Interest-earning balances with banks

Total interest-earning assets

Interest expense:

Interest-bearing demand deposits

Savings deposits

Brokered time deposits

Time deposits

Short-term borrowings

Long-term debt

Total interest-bearing liabilities

Change in net interest income

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

Nine months ended September 30, 2024 vs.

nine months ended September 30, 2023 .

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

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

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

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

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

Average noninterest-bearing deposits decreased $71.6 million.

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

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

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

Three months ended March 31, 2025 vs.

three months ended March 31, 2024 .

Net interest income increased 6.6% to $18.3 million for the three months ended March 31, 2025 compared to $17.2 million for the same period in 2024 .

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

Average short-term borrowings decreased by $186.2 million for the three months ended March 31, 2025 , as we paid all remaining borrowings under the BTFP in the fourth quarter of 2024.

The lower average balance of, and a decrease in rates paid on, short-term borrowings resulted in a $2.3 million decrease in interest expense compared to the same period in 2024 .

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

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

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

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

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

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

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

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

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

An increase in interest expense of $3.8 million resulted from an increase in volume of interest-bearing liabilities, primarily brokered time deposits and time deposits.

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

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

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

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

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

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

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

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

A lower average balance of, and a decrease in rates paid on, time deposits resulted in a $0.9 million decrease in interest expense compared to the same period in 2024 .

Average brokered time deposits were $252.3 million during the three months ended March 31, 2025 compared to $255.7 million during the three months ended March 31, 2024 , which, combined with a decrease in rates, resulted in a $0.3 million decrease in interest expense compared to the same period in 2024.

Average loans decreased by $86.6 million for the three months ended March 31, 2025 in accordance with our strategy to optimize the balance sheet , which, in addition to lower loan yields, resulted in a $1.6 million decrease in interest income on loans compared to the same period in 2024 .

Average interest-bearing demand deposits increased by $91.1 million, which, combined with an increase in rates, resulted in a $0.9 million increase in interest expense in the first quarter of 2025 compared to the same period in 2024.

Average noninterest-bearing deposits increased by $1.9 million.

Rates paid on interest-bearing liabilities decreased primarily as a result of the overall decrease in prevailing interest rates .

Our yield on interest-earning assets increased primarily due to an increase in yield on the investment securities portfolio.

Interest income was $34.4 million for the three months ended March 31, 2025 , compared to $35.7 million for the same period in 2024 .

Loan interest income made up substantially all of our interest income for the three months ended March 31, 2025 and 2024 , although interest on investment securities contributed 9.7% of interest income during the first quarter of 2025 compared to 8.6% during the first quarter of 2024 .

Of the $1.3 million decrease in interest income, a decrease in interest income of $1.1 million can be attributed to the change in the volume of interest-earnings assets and a decrease of $0.2 million can be attributed to a decrease in the yield earned on interest-earning assets.

The overall yield on interest-earning assets was 5.39% and 5.38% for the three months ended March 31, 2025 and 2024 , respectively.

The loan portfolio yielded 5.88% and 5.89% for the three months ended March 31, 2025 and March 31, 2024 , respectively, while the yield on the investment portfolio was 3.10% for the three months ended March 31, 2025 compared to 2.81% for the three months ended March 31, 2024 .

The increase in the overall yield on interest-earning assets compared to the quarter ended March 31, 2024 was primarily driven by a 29 b asis point increase in the yield on the investment securities portfolio, partially offset by a one basis point decrease in the yield on the loan portfolio.

Interest expense was $16.1 million for the three months ended March 31, 2025 , a decrease of $2.4 million compared to interest expense of $18.5 million for the three months ended March 31, 2024 .

A decrease in interest expense of $1.7 million resulted from a decrease in volume of interest-bearing liabilities, primarily short-term borrowings and time deposits, partially offset by an increase in volume of interest-bearing demand deposits.

A decrease of $0.7 million resulted from the decrease in the cost of interest-bearing liabilities, primarily time deposits and brokered time deposits, partially offset by an increase in the cost of interest-bearing demand deposits.

Average interest-bearing liabilities decreased by $94.9 million for the three months ended March 31, 2025 compared to the same period in 2024 , as average short-term borrowings decreased by $186.2 million while average interest-bearing deposits increased by $82.1 million.

Average long-term borrowings increased by $9.1 million primarily due utilization of long-term FHLB advances .

We reduced rates on our time deposits during the first quarter of 2025 compared to the first quarter of 2024 due to lower prevailing market interest rates .

We increased rates on our interest-bearing demand deposits during the first quarter of 2025 compared to the first quarter of 2024 to attract and retain lower cost deposits relative to higher cost short-term borrowings .

The cost of deposits decreased 16 basis points to 3.15% for the three months ended March 31, 2025 compared to 3.31% for the three months ended March 31, 2024 as a result of a lower average balance of, and a decrease in the cost of, time deposits and brokered time deposits, partially offset by a higher average balance of, and an increase in the cost of, interest-bearing demand deposits.

The cost of interest-bearing liabilities decreased 29 basis points to 3.22% for the three months ended March 31, 2025 compared to 3.51% for the same period in 2024 , primarily due to a lower average balance of, and a decrease in the cost of, short-term borrowings and a decrease in the cost of time deposits and brokered time deposits, partially offset by a higher cost and average balance of interest-bearing demand deposits.

Net interest margin was 2.87% for the three months ended March 31, 2025 , an increase of 28 basis points from 2.59% for the three months ended March 31, 2024 .

The increase in net interest margin was primarily driven by a 29 basis point decrease in the cost of interest-bearing liabilities, partially offset by a one basis point increase in the yield on interest-ear ning assets .

Average Balances and Yields .

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

Nine months ended September 30,

Three months ended March 31,

Yield/ Rate (1)

9 unchanged sentences

Interest-bearing demand deposits

Brokered demand deposits

Savings deposits

10 unchanged sentences

Net interest income/net interest margin

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

Interest income and net interest margin are expressed as a percentage of average interest-earning assets outstanding for the indicated periods and are not presented on a tax equivalent basis.

Interest expense is expressed as a percentage of average interest-bearing liabilities for the indicated periods.

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

Nine months ended September 30, 2024 vs.

Nine months ended September 30, 2023

Three months ended March 31, 2025 vs.

Three months ended March 31, 2024

Interest income:

3 unchanged sentences

Interest-bearing demand deposits

Brokered demand deposits

Savings deposits

7 unchanged sentences

Noninterest Income

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

Noninterest income includes, among other things, service charges on deposit accounts, gains and losses on sale or disposition of fixed assets, interchange fees, income from BOLI, and changes in the fair value of equity securities.

We expect to continue to develop new products that generate noninterest income, and enhance our existing products, in order to diversify our revenue sources.

Three months ended September 30, 2024 vs.

three months ended September 30, 2023 .

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

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

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

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

Nine months ended September 30, 2024 vs.

nine months ended September 30, 2023 .

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

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

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

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

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

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

Three months ended March 31, 2025 vs.

three months ended March 31, 2024 .

Total noninterest income decreased $0.7 million, or 26.8% , to $2.0 million for the three months ended March 31, 2025 compared to $2.7 million for the three months ended March 31, 2024 .

The decrease in noninterest income was primarily attributable to a $0.4 million decrease in gain on sale or disposition of fixed assets, a $0.2 million decrease in the change in fair value of equity securities, and a $0.2 million decrease in other operating income.

During the first quarter of 2024, Investar recorded a $0.4 million gain on sale or disposition of fixed assets as a result of the closure of one branch in the Alabama market.

The decrease in other operating income is primarily attributable to a $0.1 million decrease in distributions from other investments and a $0.1 million decrease in the change in net asset value of other investments.

Noninterest Expense

Three months ended September 30, 2024 vs.

three months ended September 30, 2023 .

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

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

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

Noninterest expense includes salaries and employee benefits and other costs associated with the conduct of our operations.

Our goal is to manage our costs within the framework of our near-term operating strategy of generating consistent, quality earnings.

Three months ended March 31, 2025 vs.

three months ended March 31, 2024 .

Total noninterest expense was $16.2 million for the three months ended March 31, 2025 , an increase of $0.9 million, or 6.2% , compared to the same period in 2024 .

The increase was primarily driven by a $0.4 million increase in salaries and employee benefits, a $0.2 million decrease in gain on early extinguishment of subordinated debt, a $0.2 million increase in professional fees, and a $0.2 million increase in other operating expense, partially offset by a $0.1 million decrease in depreciation and amortization.

The increase in salaries and employee benefits is primarily due to investment in people with an emphasis on our Texas markets to remix and strengthen our balance sheet and an increase in health insurance claims.

During the first quarter of 2024, Investar repurchased $1.0 million in principal amount of our 2032 Notes and recognized a gain on early extinguishment of subordinated debt of $0.2 million.

The increase in other operating expense resulted from a $0.3 million increase in branch services expense, and a $0.2 million increase in collection and repossession expenses, partially offset by a $0.2 million decrease in write down of other real estate owned and a $0.1 million decrease in FDIC assessments.

The increase in collection and repossession expenses was primarily due to the property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

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

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

Nine months ended September 30, 2024 vs.

nine months ended September 30, 2023 .

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

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

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

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

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

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

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

Income Tax Expense

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

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

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

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

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

Income tax expense for each of the three months ended March 31, 2025 and 2024 was $1.4 million .

The effective tax rate for the three months ended March 31, 2025 and 2024 was 18.4% and 22.7% , respectively.

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

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

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

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

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

For the three months ended March 31, 2024 , the effective tax rate differed from the statutory tax rate of 21% primarily due to the surrender of BOLI contracts, partially offset by tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

Risk Management

4 unchanged sentences

The risk of loss should a borrower default on a loan is inherent in any lending activity.

Our portfolio and related credit risk are monitored and managed on an ongoing basis by our risk management department, the board of directors’ loan committee and the full board of directors.

Our portfolio and related credit risk are monitored and managed on an ongoing basis by our risk management department, the Board’s loan committee and the full Board.

We utilize a ten point risk-rating system, which assigns a risk grade to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction.

2 unchanged sentences

These categories assist management in monitoring our credit quality.

The following describes each of the risk categories, which are consistent with the definitions used in guidance promulgated by federal banking regulators.

The risk categories, which are consistent with the definitions used in guidance promulgated by federal banking regulators, are as follows.

Pass (grades 1-6) – Loans not falling into one of the categories below are considered pass.

12 unchanged sentences

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

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

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

At March 31, 2025 and December 31, 2024 , there were no loans classified as loss or doubtful, $29.1 million and $32.7 million, respectively, of loans classified as substandard, and $11.5 million and $7.8 million, respectively, of loans classified as special mention.

An independent loan review is conducted annually, whether internally or externally, on at least 40% of commercial loans utilizing a risk-based approach designed to maximize the effectiveness of the review.

1 unchanged sentence

In addition, credit analysts periodically review certain commercial loans to identify negative financial trends related to any one borrower, any related groups of borrowers or an industry.

All loans not categorized as pass are put on an internal watch list, with quarterly reports to the board of directors.

All loans not categorized as pass are put on an internal watch list, with quarterly reports to the Board.

In addition, a written status report is maintained by our special assets division for all commercial loans categorized as substandard or worse.

1 unchanged sentence

If our collection efforts are unsuccessful, collateral securing loans may be repossessed and sold or, for loans secured by real estate, foreclosure proceedings initiated.

The collateral is generally sold at public auction for fair market value, with fees associated with the foreclosure being deducted from the sales price.

The sales price is applied to the outstanding loan balance.

The collateral is sold at public auction for fair market value (based upon recent appraisals), with fees associated with the foreclosure being deducted from the sales price.

The purchase price is applied to the outstanding loan balance.

If the loan balance is greater than the sales proceeds, the deficient balance is charged-off.

Allowance for Credit Losses .

Effective January 1, 2023, we adopted ASU 2016-13, which uses the CECL accounting methodology for the allowance for credit losses.

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

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

We account for the ACL in accordance with ASC 326, which uses the CECL accounting methodology.

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

Refer to Note 1.

Summary of Significant Accounting Policies – A ccounting Standards Adopted in 2023 in the Annual Report for information regarding our adoption of ASU 2016-13.

We maintain a separate allowance for credit losses on unfunded loan commitments, which is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets.

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

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

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

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

The ACL was $26.4 million and $26.7 million at March 31, 2025 and December 31, 2024 , respectively.

We maintain a separate ACL on unfunded loan commitments, which is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets.

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

The negative provision for credit losses for the three months ended March 31, 2024 was primarily due to a decrease in total loans, aging of existing loans, and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates.

We complete our annual model recalibration process in the first quarter of each year.

Our annual review includes peer group analysis, updates to our probability of default and loss-given default models, including prepayment and curtailment assumptions, and qualitative factor scorecard ranges, as needed.

The changes resulting from the model recalibration reduced the allowance for credit loss by approximately $0.5 million.

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

September 30, 2024

The changes resulting from the model recalibration reduced the ACL by approximately $0.5 million during each of the three month periods ended March 31, 2025 and 2024 .

Refer to Note 1.

Summary of Significant Accounting Policies – Allowance for Credit Losses in our Annual Report for further discussion of our ACL accounting policy.

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

March 31, 2025

December 31, 2024

7 unchanged sentences

Commercial and industrial

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

September 30, 2024

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

March 31, 2025

December 31, 2024

3 unchanged sentences

Commercial and industrial

As discussed above, the balance in the allowance for credit losses is principally influenced by the provision for credit losses on loans and net loan loss experience.

Additions to the allowance for credit losses are charged to the provision for credit losses on loans.

Losses are charged to the allowance as incurred and recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

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

Three months ended September 30,

Nine months ended September 30,

As discussed above, the balance in the ACL is principally influenced by the provision for credit losses on loans and net loan loss experience.

Additions to the ACL are charged to the provision for credit losses on loans.

Losses are charged to the ACL as incurred and recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

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

Three months ended March 31,

Allowance at beginning of period

ASU 2016-13 adoption impact

Provision for credit losses on loans (1)

Net recoveries

Net recoveries (charge-offs)

Allowance at end of period

4 unchanged sentences

Nonaccrual loans to total loans - period end

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

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

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

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

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

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

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

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

For the three months ended March 31, 2025 , the $3.6 million negative provision for credit losses on the consolidated statement of income includes a $3.7 million negative provision for loan losses and a $0.1 million provision for unfunded loan commitments.

For the three months ended March 31, 2024, the $1.4 million negative provision for credit losses on the consolidated statement of income includes a $1.4 million negative provision for loan losses and a $9,000 negative provision for unfunded loan commitments.

The ACL to total loans decreased to 1.25% at March 31, 2025 compared to 1.34% at March 31, 2024 , and the ACL to nonaccrual loans ratio decreased to 473.3% at March 31, 2025 compared to 515.4% at March 31, 2024 .

The decrease in the ACL to total loans compared to March 31, 2024 is primarily due to a decrease in total loans, aging of existing loans and an improvement in the economic forecast .

The decrease in ACL to nonaccrual loans compared to March 31, 2024 is primarily due to a decrease in the ACL.

Nonaccrual loans were $5.6 million, or 0.27% of total loans, at March 31, 2025 , a decrease of $64,000 compared to $5.6 million, or 0.26% of total loans, at March 31, 2024 .

The decrease in nonaccrual loans is primarily due to paydowns.

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

Three months ended September 30,

Net Recoveries (Charge-offs)

Average Balance

Ratio of Net Charge-offs (Recoveries) to Average Loans

Net Recoveries (Charge-offs)

Average Balance

Ratio of Net Charge-offs (Recoveries) to Average Loans

Mortgage loans on real estate:

Construction and development

Commercial real estate

Commercial and industrial

Nine months ended September 30,

Three months ended March 31,

Net Recoveries (Charge-offs)

10 unchanged sentences

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

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

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

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

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

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

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

For the three months ended March 31, 2025 , net recoveries were $3.4 million, or 0.16%, of the average loan balance for the period.

Net recoveries during the three months ended March 31, 2025 were primarily the result of a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida .

Net charge-offs for the three months ended March 31, 2024 were $15,000, or less than 0.01%, of the average loan balance for the period.

Net charge-offs during the three months ended March 31, 2024 were primarily attributable to commercial and industrial and consumer loans.

Management believes the ACL at March 31, 2025 is sufficient to provide adequate protection against losses in our portfolio.

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

This allowance may prove to be inadequate due to higher inflation and interest rates than anticipated, other unanticipated adverse changes in the economy, unanticipated effects of the current geopolitical and domestic political conflicts, a resurgence of COVID-19, or discrete events adversely affecting specific customers or industries.

This allowance may prove to be inadequate due to higher inflation and interest rates than anticipated, other unanticipated adverse changes in the economy, unanticipated effects of the current geopolitical and domestic political conflicts, a public health crisis, or discrete events adversely affecting specific customers or industries.

We are monitoring changes and potential changes to U.S.

tariff and trade policies, particularly those occurring after the end of first quarter 2025.

The current environment is dynamic and uncertain.

Changing U.S.

tariff and trade policies could cause higher inflation, higher interest rates and slower economic growth or recession in the U.S., at least in the near term.

These changes and uncertainties regarding future changes could cause deterioration in credit quality that could lead us to increase our ACL in future periods.

Our results of operations and financial condition could be materially adversely affected to the extent that the allowance is insufficient to cover such changes or events.

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

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

Nonperforming loans were $5.6 million, or 0.27% of total loans, at March 31, 2025 , a decrease of $3.2 million compared to $8.8 million, or 0.42% of total loans, at December 31, 2024 .

The decrease in nonperforming loans compared to December 31, 2024 is mainly attributable to paydowns.

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Occasionally, we modify loans to borrowers in financial distress by providing certain concessions, such as principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, excluding covenant waivers and modification of contingent acceleration clauses, or a combination of such concessions.

When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

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

During the three months ended March 31, 2025 and 2024 , we did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

Other Real Estate Owned.

Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure.

These properties are initially recorded at fair value at the time of foreclosure, less estimated selling cost.

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

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

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

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

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

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

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

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

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.

For the three months ended March 31, 2025 , additions to other real estate owned were $1.0 million, which were driven by transfers of commercial real estate loans to other real estate owned.

No other real estate owned wa s sold during the three months ended March 31, 2025 and 2024 .

During the three months ended March 31, 2024 , we recorded a $0.2 million write-down of other real estate owned primarily related to a former branch location based on a third-party appraisal.

At March 31, 2025 , approximately $1.0 million of loans secured by 1-4 family residential property were in the process of foreclosure.

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

September 30, 2024

March 31, 2025

December 31, 2024

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

Nine months ended September 30,

Three months ended March 31,

Balance, beginning of period

Transfers from bank premises and equipment

Sales of other real estate owned

Balance, end of period

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

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

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

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

After June 2022, the rate of inflation generally declined;

however, it has remained higher than the Federal Reserve’s target inflation rate of two percent.

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

We believe that higher rates resulting from inflation and related factors led to constrained loan demand during 2023 and 2024 and through March 31, 2025.

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

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

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

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

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

We are monitoring changes and potential changes to U.S.

tariff and trade policies, particularly those occurring after the end of first quarter 2025.

The current environment is dynamic and uncertain.

Changing U.S.

tariff and trade policies could cause higher inflation, higher interest rates and slower economic growth or recession in the U.S., at least in the near term.

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

In response, from September 2024 to December 2024, the Federal Reserve reduced the federal funds target rate by 100 basis points to 4.25% to 4.50%, where it remained as of May 7, 2025.

As noted above, the inflationary outlook in the U.S.

remains uncertain.

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

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

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

“ Risk Factors – Risks Related to our Business – Increasing and high interest rates in 2022 and 2023 caused interest expense on both deposits and borrowings to increase significantly in 2023;

further increases in interest rates could continue to have an adverse effect on our profitability ” and “ – Inflation and rising prices may continue to adversely affect our results of operations and financial condition ,” in our Annual Report .

For additional information, see Interest Rate Risk below, and Item 1A.

“Risk Factors – Risks Related to our Business – Changes in interest rates could have an adverse effect on our profitability ” and – “Inflation and rising prices may continue to adversely affect our results of operations and financial condition ” in our Annual Report.

Interest Rate Risk

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To that end, management actively monitors and manages our interest rate risk exposure.

The ALCO has been authorized by the board of directors to implement our asset/liability management policy, which establishes guidelines with respect to our exposure to interest rate fluctuations, liquidity, loan limits as a percentage of funding sources, exposure to correspondent banks and brokers and reliance on non-core deposits.

The ALCO has been authorized by the Board to implement our asset/liability management policy, which establishes guidelines with respect to our exposure to interest rate fluctuations, liquidity, loan limits as a percentage of funding sources, exposure to correspondent banks and brokers and reliance on non-core deposits.

The goal of the policy is to enable us to maximize our interest income and maintain our net interest margin without exposing the Bank to excessive interest rate risk, credit risk and liquidity risk.

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Net interest income simulation is the Bank’s primary tool for benchmarking near term earnings exposure.

Given the ALCO’s objective to understand the potential risk/volatility embedded within the current mix of assets and liabilities, standard rate scenario simulations assume total assets remain static (i.e., no growth).

Given the ALCO’s objective to understand the potential risk and volatility embedded within the current mix of assets and liabilities, standard rate scenario simulations assume total assets remain static (i.e.

The Bank may also use a standard gap report in its interest rate risk management process.

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Hence, the income simulation is the key indicator for earnings-at-risk since it expressly measures what the gap report attempts to estimate.

Short-term interest rate risk management tactics are decided by the ALCO where risk exposures exist out into the 1 to 2 year horizon.

Short term interest rate risk management tactics are decided by the ALCO where risk exposures exist out into the one to two-year horizon.

Tactics are formulated and presented to the ALCO for discussion, modification, and/or approval.

Such tactics may include asset and liability acquisitions of appropriate maturities in the cash market, loan and deposit product/pricing strategy modification, and derivatives hedging activities to the extent such activity is authorized by the board of directors.

Since the impact of rate changes due to mismatched balance sheet positions in the short-term can quickly and materially affect the current year’s income statement, they require constant monitoring and management.

Within the gap position that management directs, we attempt to structure our assets and liabilities to minimize the risk of either a rising or falling interest rate environment.

We manage our gap position for time horizons of one month, two months, three months, 4-6 months, 7-12 months, 13-24 months, 25-36 months, 37-60 months and more than 60 months.

We manage our gap position for time horizons of one month, two months, three months, four to six months, seven to twelve months, 13-24 months, 25-36 months, 37-60 months and more than 60 months.

The goal of our asset/liability management is for the Bank to maintain a net interest income at risk in an up or down 100 basis point environment at less than (5)%.

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

At March 31, 2025 , the Bank was within the policy guidelines for asset/liability management.

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

As of September 30, 2024

As of March 31, 2025

Changes in Interest Rates (in basis points)

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Maintaining the ability to acquire these funds as needed in a variety of markets, and within ALCO compliance targets, is essential to ensuring our liquidity.

At both September 30, 2024 and December 31, 2023 , 64% of our total assets were funded by core deposits.

At March 31, 2025 and December 31, 2024 , 69% and 68%, respectively, of our total assets were funded by core deposits.

Our investment portfolio is another alternative for meeting our cash flow requirements.

Investment securities generate cash flow through principal payments and maturities, and they generally have readily available markets that allow for their conversion to cash.

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

Investment securities generate cash flow through interest payments, principal payments and maturities, and they generally have readily available markets that allow for their conversion to cash.

At March 31, 2025 , 89% of our investment securities portfolio was classified as AFS, and we had gross unrealized losses in our AFS investment securities portfolio of $54.8 million and gross unrealized gains of $0.3 million.

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

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

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

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

At March 31, 2025 , securities with a carrying value of $67.4 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $68.1 million i n pledged securities at December 31, 2024.

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

FHLB advances may be used to meet day to day liquidity needs, particularly if the prevailing interest rate on an FHLB advance compares favorably to the rates that we would be required to pay to attract deposits.

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

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

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

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

The BTFP is a one-year program which ended on March 11, 2024, and which allowed us to borrow at any time during the term and repay the obligation at any time without penalty.

Beginning in the second quarter of 2023, we utilized the BTFP to secure fixed rate funding for a one-year term and reduce short-term FHLB advances, which are priced daily.

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

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

At March 31, 2025 , the balanc e of our outstanding advances with the FHLB was $60.0 million, all of which were long-term advances based on original maturity, a decrease of $7.2 million, compared to $67.2 million, consisting of $7.2 million short-term and $60.0 million long-term advances based on original maturities, at December 31, 2024.

The total amount of remaining credit available to us from the FHLB at March 31, 2025 was $712.5 million .

At March 31, 2025 , our FHLB borrowings were collateralized by a blanket pledge of certain loans totaling approximately $951.7 million .

Repurchase agreements are contracts for the sale of securities which we own with a corresponding agreement to repurchase those securities at an agreed upon price and date.

Our policies limit the use of repurchase agreements to those collateralized by investment securities.

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

We had $11.3 milli on of repurchase agreements outstanding at March 31, 2025 and $8.4 million at December 31, 2024 .

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

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

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

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

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

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

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

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

For additional information on our 2029 Notes and 2032 Notes, see our Annual Report, Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Discussion and Analysis of Financial Condition – Borrowings” and Note 10 to the financial statements included in such report.

There were no outstanding balances on our unsecured lines of credit at March 31, 2025 and December 31, 2024 .

At March 31, 2025 , we held $43.5 million of cash and cash equivalents and maintained approximate ly $712.5 million o f available funding from FHLB advances and maintained $60.0 million in unsecured lines of credit with correspondent banks.

Cash and cash equivalents and available funding represen t 102% of uninsured deposits of $803.7 million at March 31, 2025 .

In addition, at March 31, 2025 and December 31, 2024 , we had $17.0 million in aggregate principal amount of subordinated debt outstanding, consisting entirely of our 2032 Notes.

For additional information on our 2032 Notes, see our Annual Report, Part II.

“MD&A – Discussion and Analysis of Financial Condition – Borrowings” and Note 10 to the financial statements included in such report.

Our liquidity strategy is focused on using the least costly funds available to us in the context of our balance sheet composition and interest rate risk position.

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Although we cannot directly control the types of deposit instruments our customers choose, we can influence those choices with the interest rates and deposit specials we offer.

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

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

In recent years, the proportion of our deposits represented by noninterest-bearing deposits has declined primarily due to rising market interest rates as customers have migrated to higher yielding alternatives , although such proportion increased as of the end of first quarter 2025 as rates declined in the latter part of 2024 .

At March 31, 2025 , we held $244.9 million of brokered time deposits and no brokered demand deposits as defined for federal regulatory purposes.

At December 31, 2024 , we held $245.5 million of brokered time deposits and $47.3 million of brokered demand deposits as defined for federal regulatory purposes.

W e utilize brokered time deposits to secure fixed cost funding and reduce short-term borrowings.

We utilize brokered demand deposits when pricing is more favorable than other short-term borrowings.

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

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

The following table presents, by type, our funding sources, which consist of total average deposits and borrowed funds, as a percentage of total funds and the total cost of each funding source for the three and nine months ended September 30, 2024 and 2023 .

Percentage of Total Average Deposits and Borrowed Funds

At March 31, 2025 , we h eld $7.7 million of QwickRate® deposits, a decrease of $5.2 million compared to $12.9 million at December 31, 2024 .

Percentage of Total Average Deposits and Borrowed Funds

Cost of Funds

Three months ended September 30,

Nine months ended September 30,

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Noninterest-bearing demand deposits

Interest-bearing demand deposits

Brokered demand deposits

Savings accounts

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

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

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

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

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

During the three months ended March 31, 2025 and 2024, we paid $1.0 m illion in dividends .

We declared dividends on our common stock of $0.105 per share during the three months ended March 31, 2025 compared to dividends of $0.10 per share during the three months ended March 31, 2024 .

Our Board has authorized a share repurchase program, and at March 31, 2025 , we had 460,653 shar es of our common stock remaining authorized for repurchase under the program.

During the three months ended March 31, 2025 , we paid $0.6 million to repurchase 34,992 shares of our common stock, compared to paying $0.2 million to repurchas e 10,525 s hares of our common stock during the three months ended March 31, 2024 .

The aggregate purchase price does not include the effect of excise tax expense incurred on net share repurchases.

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

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

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

The Company and the Bank each were in compliance with all regulatory capital requirements at March 31, 2025 and December 31, 2024 .

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

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

September 30, 2024

March 31, 2025

Investar Holding Corporation:

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Swap Contracts.

The Bank historically has entered into interest rate swap contracts, some of which are forward starting, 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.

The Bank historically has entered into interest rate swap contracts, some of which are forward starting, to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the one-month SOFR associated with the forecasted issuances of one-month fixed rate debt arising from a rollover strategy.

An interest rate swap is an agreement whereby one party agrees to pay a fixed rate of interest on a notional principal amount in exchange for receiving a floating rate of interest on the same notional amount for a predetermined period of time, from a second party.

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

At March 31, 2025 and December 31, 2024 , we had no current or forward starting interest rate swap agreements, other than interest rate swaps related to customer loans, described below.

For additional information, see Note 6.

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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.

The interest rate swaps with both the customers and third parties are not designated as hedges under ASC 815 , and are marked to market through 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” .

however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820 .

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

three and nine months ended September 30, 2024

September 30, 2024

three months ended March 31, 2025

March 31, 2025

December 31, 2024

, we had notional amo unts of $183.3 million and $186.9 million, respectively, in interest rate swap contracts with customers and $183.3 million and $186.9 million, respectively, in offsetting interest rate swap contracts with other financial institutions.

September 30, 2024

March 31, 2025

December 31, 2024

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Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the customer.

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

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

Loan commitments are also evaluated in a manner similar to the ACL on loans.

The reserve for unfunded loan commitments is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets and was $0.1 million and $42,000 at March 31, 2025 and December 31, 2024 , respectively.

Loan commitments and standby letters of credit do not necessarily represent future cash requirements, in that while the customer typically has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon in full or at all.

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

September 30, 2024

March 31, 2025

December 31, 2024

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

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

For the nine months ended September 30, 2024 and for the year ended December 31, 2023 , except as disclosed herein and in the Company’s Annual Report, we engaged in no off-balance sheet transactions that we believe are reasonably likely to have a material effect on our financial condition, results of operations, or cash flows.

Additionally, at March 31, 2025 , the Company had unfunded commitments of $0.9 million for its investment in SBIC qualified funds and other investment funds.

For the three months ended March 31, 2025 and for the year ended December 31, 2024 , except as disclosed herein and in the Company’s Annual Report, we engaged in no off-balance sheet transactions that we believe are reasonably likely to have a material effect on our financial condition, results of operations, or cash flows.

Lease Obligations.

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

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

The following table presents, as of March 31, 2025 , contractually obligated lease payments due under non-cancelable operating leases by payment date (dollars in thousands).

Less than one year

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Over five years

On January 27, 2023, we 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, we recorded $0.3 million of occupancy expense to terminate the remaining contractually obligated lease payments due under non-cancelable operating leases.

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

What changed 10-Q

Item 1. Financial Statements