Investar Holding Corp - Quarter Report: 2016 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36522

Investar Holding Corporation

(Exact name of registrant as specified in its charter)

Louisiana

27-1560715

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7244 Perkins Road, Baton Rouge, Louisiana 70808

(Address of principal executive offices, including zip code)

(225) 227-2222

(Registrant’s telephone number, including area code)

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

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

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


Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, is as follows: Common stock, $1.00 par value, 7,295,195 shares outstanding as of May 5, 2016.

TABLE OF CONTENTS

Special Note Regarding Forward-Looking Statements		3

Part I. Financial Information

Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	4
	Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015	5
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015	6
	Consolidated Statements of Changes in Stockholders’ Equity	7
	Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	8
	Notes to the Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	44

Part II. Other Information		45

Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 6.	Exhibits	46
Signatures		47
Exhibit Index		48

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

When included in this Quarterly Report on Form 10-Q, or in other documents that Investar Holding Corporation (the “Company”) files with the Securities and Exchange Commission (“SEC”) or in statements made by or on behalf of the Company, words like “may,” “should,” “could,” “predict,” “potential,” “believe,” “think,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “outlook” and similar expressions or the negative version of those words are intended to identify forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and uncertainties that could cause actual results to differ materially from those described therein. The Company’s forward-looking statements are based on assumptions and estimates that management believes to be reasonable in light of the information available at the time such statements are made. However, many of the matters addressed by these statements are inherently uncertain and could be affected by many factors beyond management’s control. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include, but are not limited to, the following, any one or more of which could materially affect the outcome of future events:

•

business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate;

•

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

•

changes (or the lack of changes) in interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;

•

the extent of continuing client demand for the high level of personalized service that is a key element of our banking approach as well as our ability to execute our strategy generally;

•

our dependence on our management team, and our ability to attract and retain qualified personnel;

•

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

•

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

•

the concentration of our business within our geographic areas of operation in Louisiana; and

•

concentration of credit exposure.

These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Item 1A. “Risk Factors” and Item 7. “Special Note Regarding Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission.

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

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INVESTAR HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	March 31, 2016			December 31, 2015
	(Unaudited)
ASSETS
Cash and due from banks	$	8,808		$	6,313
Interest-bearing balances due from other banks		12,465			14,472
Federal funds sold		51			181
Cash and cash equivalents		21,324			20,966

Available for sale securities at fair value (amortized cost of $127,737 and $113,828, respectively)		128,570			113,371
Held to maturity securities at amortized cost (estimated fair value of $26,348 and $26,271, respectively)		26,249			26,408
Loans held for sale		50,921			80,509
Loans, net of allowance for loan losses of $6,463 and $6,128, respectively		791,159			739,313
Other equity securities		7,183			5,835
Bank premises and equipment, net of accumulated depreciation of $5,727 and $5,368, respectively		30,759			30,630
Other real estate owned, net		695			725
Accrued interest receivable		2,978			2,831
Deferred tax asset		1,934			1,915
Goodwill and other intangible assets, net		3,265			3,175
Other assets		8,492			5,877
Total assets	$	1,073,529		$	1,031,555

LIABILITIES
Deposits:
Noninterest-bearing	$	95,033		$	90,447
Interest-bearing		713,665			646,959
Total deposits		808,698			737,406
Advances from Federal Home Loan Bank		103,960			127,497
Repurchase agreements		29,678			39,099
Junior subordinated debt		3,609			3,609
Accrued taxes and other liabilities		16,097			14,594
Total liabilities		962,042			922,205

STOCKHOLDERS’ EQUITY
Preferred stock, $1.00 par value per share; 5,000,000 shares authorized		-			-
Common stock, $1.00 par value per share; 40,000,000 shares authorized; 7,358,231 and 7,305,213 shares issued, and 7,296,429 and 7,264,282 shares outstanding, respectively		7,358			7,305
Treasury stock		(952	)		(634	)
Surplus		84,780			84,692
Retained earnings		20,575			18,650
Accumulated other comprehensive loss		(274	)		(663	)
Total stockholders’ equity		111,487			109,350
Total liabilities and stockholders’ equity	$	1,073,529		$	1,031,555

See accompanying notes to the consolidated financial statements.

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share data)

(Unaudited)

	Three months ended
	March 31,
	2016		2015

INTEREST INCOME
Interest and fees on loans	$	9,485	$	8,298
Interest on investment securities		856		485
Other interest income		37		17
Total interest income		10,378		8,800

INTEREST EXPENSE
Interest on deposits		1,515		1,192
Interest on borrowings		316		109
Total interest expense		1,831		1,301
Net interest income		8,547		7,499

Provision for loan losses		454		700
Net interest income after provision for loan losses		8,093		6,799

NONINTEREST INCOME
Service charges on deposit accounts		97		94
Gain on sale of investment securities, net		80		-
Gain (loss) on sale of other real estate owned, net		1		(1	)
Gain on sale of loans, net		313		1,731
Fee income on loans held for sale, net		123		300
Other operating income		673		416
Total noninterest income		1,287		2,540
Income before noninterest expense		9,380		9,339

NONINTEREST EXPENSE
Depreciation and amortization		370		357
Salaries and employee benefits		3,873		3,908
Occupancy		236		213
Data processing		374		340
Marketing		112		58
Professional fees		279		262
Other operating expenses		1,140		1,286
Total noninterest expense		6,384		6,424
Income before income tax expense		2,996		2,915
Income tax expense		1,006		965
Net income	$	1,990	$	1,950

EARNINGS PER SHARE
Basic earnings per share	$	0.28	$	0.27
Diluted earnings per share	$	0.28	$	0.27
Cash dividends declared per common share	$	0.01	$	0.01

See accompanying notes to the consolidated financial statements.

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

	Three months ended
	March 31,
	2016			2015

Net income	$	1,990		$	1,950
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities:
Unrealized gain, available for sale, net of tax expense of $480, and $143, respectively		891			278
Reclassification of realized gain, net of tax benefit of $28 and $0, respectively		(52	)		-
Unrealized loss, transfer from available for sale to held to maturity, net of tax benefit of $0 and $0, respectively		(1	)		(1	)
Fair value of derivative financial instruments:
Change in fair value of interest rate swap designated as a cash flow hedge, net of tax benefit of $242 and $126, respectively		(449	)		(245	)
Total other comprehensive income		389			32
Total comprehensive income	$	2,379		$	1,982


See accompanying notes to the consolidated financial statements.

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

											Accumulated
											Other			Total
	Common		Treasury					Retained			Comprehensive			Stockholders’
	Stock		Stock			Surplus		Earnings			Income (Loss)			Equity
Balance, December 31, 2014	$	7,264	$	(23	)	$	84,213	$	11,809		$	121		$	103,384
Surrendered shares		-		(39	)		-		-			-			(39	)
Shares repurchased		-		(572	)		-		-			-			(572	)
Options exercised		10		-			125		-			-			135
Dividends declared, $0.03 per share		-		-			-		(232	)		-			(232	)
Stock-based compensation		31		-			354		-			-			385
Net income		-		-			-		7,073			-			7,073
Other comprehensive loss, net		-		-			-		-			(784	)		(784	)
Balance, December 31, 2015	$	7,305	$	(634	)	$	84,692	$	18,650		$	(663	)	$	109,350
Surrendered shares		-		(3	)		-		-			-			(3	)
Shares repurchased		-		(315	)		-		-			-			(315	)
Dividends declared, $0.01 per share		-		-			-		(65	)		-			(65	)
Stock-based compensation		53		-			88		-			-			141
Net income		-		-			-		1,990			-			1,990
Other comprehensive income, net		-		-			-		-			389			389
Balance, March 31, 2016 (Unaudited)	$	7,358	$	(952	)	$	84,780	$	20,575		$	(274	)	$	111,487


See accompanying notes to the consolidated financial statements.

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	For the three months ended
	March 31,
	2016			2015
Cash flows from operating activities:
Net income	$	1,990		$	1,950
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		370			357
Provision for loan losses		454			700
Amortization of purchase accounting adjustments		(17	)		(70	)
Provision for other real estate owned		-			12
Net amortization of securities		230			251
Gain on sale of securities, net		(80	)		-
(Gain) loss on sale of other real estate owned, net		(1	)		1
FHLB stock dividend		(11	)		(3	)
Stock-based compensation		141			77
Deferred taxes		(228	)		646
Increase in cash surrender value of bank owned life insurance		(42	)		-
Other		-			11
Loans held for sale:
Originations		(495	)		(102,886	)
Proceeds from sales		23,837			143,699
Gain on sale of loans		(313	)		(1,731	)
Net change in:
Accrued interest receivable		(148	)		119
Other assets		927			152
Accrued taxes and other liabilities		807			4,082
Net cash provided by operating activities		27,421			47,367

Cash flows from investing activities:
Proceeds from sales of investment securities available for sale		3,440			-
Funds invested in securities available for sale		(19,594	)		(8,616	)
Proceeds from maturities, prepayments and calls of investment securities available for sale		2,111			2,462
Proceeds from maturities, prepayments and calls of investment securities held to maturity		143			143
Proceeds from redemption of other equity securities		-			5,356
Purchase of other equity securities		(1,338	)		(1,625	)
Net increase in loans		(45,779	)		(23,819	)
Proceeds from sales of other real estate owned		62			417
Purchases of bank premises and equipment		(489	)		(945	)
Acquisition of trademark intangible		(100	)		-
Purchase of bank owned life insurance		(3,500	)		-
Net cash used in investing activities		(65,044	)		(26,627	)

Cash flows from financing activities:
Net increase in customer deposits		71,317			70,800
Net (decrease) increase in repurchase agreements		(9,422	)		585
Net decrease in short-term FHLB advances		(21,903	)		(90,639	)
Proceeds from long-term FHLB advances		-			500
Repayment of long-term FHLB advances		(1,633	)		(781	)
Cash dividends paid on common stock		(63	)		(51	)
Payments to repurchase common stock		(315	)		-
Net cash provided by (used in) financing activities		37,981			(19,586	)

Net increase in cash and cash equivalents		358			1,154
Cash and cash equivalents, beginning of period		20,966			19,512
Cash and cash equivalents, end of period	$	21,324		$	20,666

See accompanying notes to the consolidated financial statements.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Nature of Operations

Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank (the “Bank”), a Louisiana-chartered bank. The Company’s primary market is South Louisiana. The Company currently operates 11 full service banking offices located throughout its market and had 154 employees at March 31, 2016.

Principles of Consolidation

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

Use of Estimates

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

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

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

Reclassifications

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

Concentrations of Credit Risk

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting Pronouncements

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

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

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

NOTE 2. EARNINGS PER SHARE

The following is a summary of the information used in the computation of basic and diluted earnings per common share for the three months ended March 31, 2016 and 2015 (in thousands, except share data).

	Three months ended March 31,
	2016		2015

Net income available to common shareholders	$	1,990	$	1,950
Weighted average number of common shares outstanding used in computation of basic earnings per common share		7,194,558		7,219,235
Effect of dilutive securities:
Restricted stock		15,353		12,738
Stock options		14,854		9,961
Stock warrants		11,267		8,921
Weighted average number of common shares outstanding plus effect of dilutive securities used in computation of diluted earnings per common share		7,236,032		7,250,855
Basic earnings per share	$	0.28	$	0.27
Diluted earnings per share	$	0.28	$	0.27

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3. INVESTMENT SECURITIES

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
March 31, 2016	Cost		Gains		Losses			Value
Obligations of other U.S. government agencies and corporations	$	31,153	$	412	$	(9	)	$	31,556
Obligations of state and political subdivisions		20,294		292		(14	)		20,572
Corporate bonds		15,062		59		(295	)		14,826
Residential mortgage-backed securities		58,729		553		(49	)		59,233
Commercial mortgage-backed securities		1,261		19		-			1,280
Equity securities		1,238		1		(136	)		1,103
Total	$	127,737	$	1,336	$	(503	)	$	128,570

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2015	Cost		Gains		Losses			Value
Obligations of other U.S. government agencies and corporations	$	26,502	$	73	$	(102	)	$	26,473
Obligations of state and political subdivisions		21,365		125		(23	)		21,467
Corporate bonds		15,069		1		(246	)		14,824
Residential mortgage-backed securities		47,703		72		(249	)		47,526
Commercial mortgage-backed securities		2,005		-		(16	)		1,989
Equity securities		1,184		8		(100	)		1,092
Total	$	113,828	$	279	$	(736	)	$	113,371

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
March 31, 2016	Cost		Gains		Losses			Value
Obligations of other U.S. government agencies and corporations	$	3,989	$	7	$	-		$	3,996
Residential mortgage-backed securities		8,315		73		(12	)		8,376
Obligations of state and political subdivisions		13,945		31		-			13,976
Total	$	26,249	$	111	$	(12	)	$	26,348

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2015	Cost		Gains		Losses			Value
Obligations of other U.S. government agencies and corporations	$	3,987	$	-	$	(64	)	$	3,923
Residential mortgage-backed securities		8,373		5		(91	)		8,287
Obligations of state and political subdivisions		14,048		18		(5	)		14,061
Total	$	26,408	$	23	$	(160	)	$	26,271

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

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

			Less than 12 Months					12 Months or More					Total
					Unrealized					Unrealized					Unrealized
March 31, 2016	Count		Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Obligations of other U.S. government agencies and corporations		3	$	2,621	$	(9	)	$	-	$	-		$	2,621	$	(9	)
Obligations of state and political subdivisions		6		1,565		(14	)		275		-			1,840		(14	)
Corporate bonds		26		6,759		(217	)		4,446		(78	)		11,205		(295	)
Residential mortgage-backed securities		22		10,629		(48	)		309		(1	)		10,938		(49	)
Equity securities		9		583		(122	)		492		(14	)		1,075		(136	)
Total		66	$	22,157	$	(410	)	$	5,522	$	(93	)	$	27,679	$	(503	)

			Less than 12 Months					12 Months or More					Total
					Unrealized					Unrealized					Unrealized
December 31, 2015	Count		Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Obligations of other U.S. government agencies and corporations		28	$	14,792	$	(93	)	$	592	$	(9	)	$	15,384	$	(102	)
Obligations of state and political subdivisions		14		2,312		(11	)		1,322		(12	)		3,634		(23	)
Corporate bonds		29		10,888		(222	)		1,225		(24	)		12,113		(246	)
Residential mortgage-backed securities		62		31,836		(245	)		326		(4	)		32,162		(249	)
Commercial mortgage-backed securities		3		1,989		(16	)		-		-			1,989		(16	)
Equity securities		8		517		(79	)		485		(21	)		1,002		(100	)
Total		144	$	62,334	$	(666	)	$	3,950	$	(70	)	$	66,284	$	(736	)

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

			Less than 12 Months				12 Months or More					Total
					Unrealized				Unrealized					Unrealized
March 31, 2016	Count		Fair Value		Losses		Fair Value		Losses			Fair Value		Losses
Residential mortgage-backed securities		3	$	-	$	-	$	1,957	$	(12	)	$	1,957	$	(12	)
Total		3	$	-	$	-	$	1,957	$	(12	)	$	1,957	$	(12	)

			Less than 12 Months					12 Months or More					Total
					Unrealized					Unrealized					Unrealized
December 31, 2015	Count		Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Obligations of other U.S. government agencies and corporations		2	$	1,958	$	(36	)	$	1,965	$	(28	)	$	3,923	$	(64	)
Obligations of state and political subdivisions		1		6,862		(5	)		-		-			6,862		(5	)
Residential mortgage-backed securities		7		4,469		(37	)		1,932		(54	)		6,401		(91	)
Total		10	$	13,289	$	(78	)	$	3,897	$	(82	)	$	17,186	$	(160	)

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	Securities Available for Sale							Securities Held to Maturity
	Weighted							Weighted
	Average T.E.			Amortized		Fair		Average T.E.			Amortized		Fair
March 31, 2016	Yield			Cost		Value		Yield			Cost		Value
Due within one year		-	%	$	-	$	-		7.17	%	$	655	$	657
Due after one year through five years		2.10			9,393		9,404		7.17			2,950		2,959
Due after five years through ten years		2.81			24,478		24,494		7.17			3,575		3,585
Due after ten years		2.53			92,628		93,569		3.14			19,069		19,147
Total debt securities				$	126,499	$	127,467				$	26,249	$	26,348

	Securities Available for Sale							Securities Held to Maturity
	Weighted							Weighted
	Average T.E.			Amortized		Fair		Average T.E.			Amortized		Fair
December 31, 2015	Yield			Cost		Value		Yield			Cost		Value
Due within one year		-	%	$	-	$	-		7.17	%	$	655	$	657
Due after one year through five years		2.01			9,979		9,984		7.17			2,950		2,958
Due after five years through ten years		2.81			23,662		23,494		7.17			3,575		3,584
Due after ten years		2.63			79,003		78,801		3.17			19,228		19,072
Total debt securities				$	112,644	$	112,279				$	26,408	$	26,271

NOTE 4. LOANS

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

	March 31, 2016		December 31, 2015
Construction and development	$	95,353	$	81,863
1-4 Family		162,312		156,300
Multifamily		33,609		29,694
Farmland		6,366		2,955
Commercial real estate		315,759		288,583
Total mortgage loans on real estate		613,399		559,395
Commercial and industrial		74,990		69,961
Consumer		109,233		116,085
Total loans	$	797,622	$	745,441

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	March 31, 2016
	Past Due and Accruing
									Total Past
					90 or more				Due &
	30-59 days		60-89 days		days		Nonaccrual		Nonaccrual		Current		Total Loans
Construction and development	$	99	$	-	$	-	$	1,040	$	1,139	$	94,214	$	95,353
1-4 Family		1,044		-		-		494		1,538		160,774		162,312
Multifamily		-		-		-		-		-		33,609		33,609
Farmland		-		-		-		-		-		6,366		6,366
Commercial real estate		-		-		-		-		-		315,759		315,759
Total mortgage loans on real estate		1,143		-		-		1,534		2,677		610,722		613,399
Commercial and industrial		17		25		-		18		60		74,930		74,990
Consumer		279		97		-		758		1,134		108,099		109,233
Total loans	$	1,439	$	122	$	-	$	2,310	$	3,871	$	793,751	$	797,622

	December 31, 2015
	Past Due and Accruing
									Total Past
					90 or more				Due &
	30-59 days		60-89 days		days		Nonaccrual		Nonaccrual		Current		Total Loans
Construction and development	$	129	$	-	$	-	$	1,061	$	1,190	$	80,673	$	81,863
1-4 Family		222		-		-		538		760		155,540		156,300
Multifamily		-		-		-		-		-		29,694		29,694
Farmland		-		-		-		-		-		2,955		2,955
Commercial real estate		-		-		-		97		97		288,486		288,583
Total mortgage loans on real estate		351		-		-		1,696		2,047		557,348		559,395
Commercial and industrial		26		1,779		-		-		1,805		68,156		69,961
Consumer		292		179		-		715		1,186		114,899		116,085
Total loans	$	669	$	1,958	$	-	$	2,411	$	5,038	$	740,403	$	745,441

The total March 31, 2016 balance in the table above includes approximately $33.9 million of loans acquired in acquisitions (“acquired loans”) that were recorded at fair value as of the acquisition dates. Included in the acquired loan balances as of March 31, 2016 were approximately $1.0 million in loans 30-59 days past due and $1.0 million in nonaccrual loans.

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

Credit Quality Indicators

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

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

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

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

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

	March 31, 2016
			Special
	Pass		Mention		Substandard		Total
Construction and development	$	94,287	$	-	$	1,066	$	95,353
1-4 Family		160,752		716		844		162,312
Multifamily		33,609		-		-		33,609
Farmland		6,366		-		-		6,366
Commercial real estate		315,034		-		725		315,759
Total mortgage loans on real estate		610,048		716		2,635		613,399
Commercial and industrial		71,897		-		3,093		74,990
Consumer		107,742		696		795		109,233
Total loans	$	789,687	$	1,412	$	6,523	$	797,622

	December 31, 2015
			Special
	Pass		Mention		Substandard		Total
Construction and development	$	80,759	$	15	$	1,089	$	81,863
1-4 Family		154,741		719		840		156,300
Multifamily		29,694		-		-		29,694
Farmland		2,955		-		-		2,955
Commercial real estate		287,853		-		730		288,583
Total mortgage loans on real estate		556,002		734		2,659		559,395
Commercial and industrial		66,694		-		3,267		69,961
Consumer		114,684		647		754		116,085
Total loans	$	737,380	$	1,381	$	6,680	$	745,441

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

Loan participations and whole loans sold to and serviced for others are not included in the accompanying consolidated balance sheets. The balances of the participations and whole loans sold were $371.8 million and $383.7 million as of March 31, 2016 and December 31, 2015, respectively. The unpaid principal balances of these loans were approximately $415.5 million and $426.9 million as of March 31, 2016 and December 31, 2015, respectively.

In the ordinary course of business, the Company makes loans to its executive officers, principal stockholders, directors and to companies in which these individuals are principal owners. Loans outstanding to such borrowers (including companies in which they are principal owners) amounted to approximately $18.4 million and $18.0 million as of March 31, 2016 and December 31, 2015, respectively. These loans are all current and performing according to the original terms. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the Company or the Bank and did not involve more than normal risk of collectability or present other unfavorable features.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	March 31, 2016			December 31, 2015
Balance, beginning of period	$	17,992		$	14,631
New loans		1,193			6,600
Repayments		(753	)		(3,239	)
Balance, end of period	$	18,432		$	17,992

Loans Acquired with Deteriorated Credit Quality

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

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

	Acquired
	Impaired
Carrying value, net at December 31, 2014	$	2,778
Accretion to interest income		140
Net transfers from (to) nonaccretable difference to (from) accretable yield		110
Payments received, net		(232	)
Charge-offs		(61	)
Transfers to other real estate owned		(45	)
Carrying value, net at December 31, 2015	$	2,690
Accretion to interest income		35
Net transfers from (to) nonaccretable difference to (from) accretable yield		1
Payments received, net		(106	)
Charge-offs		(37	)
Carrying value, net at March 31, 2016	$	2,583

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

	Acquired
	Impaired
Balance, period ended December 31, 2014	$	425
Net transfers from (to) nonaccretable difference to (from) accretable yield		110
Accretion to interest income		(140	)
Balance, period ended December 31, 2015	$	395
Net transfers from (to) nonaccretable difference to (from) accretable yield		1
Accretion to interest income		(35	)
Balance, period ended March 31, 2016	$	361

NOTE 5. ALLOWANCE FOR LOAN LOSSES

The table below shows a summary of the activity in the allowance for loan losses for the three months ended March 31, 2016 and 2015 (dollars in thousands).

	Three months ended
	March 31, 2016			March 31, 2015
Balance, beginning of period	$	6,128		$	4,630
Provision for loan losses		454			700
Loans charged off		(156	)		(142	)
Recoveries		37			191
Balance, end of period	$	6,463		$	5,379

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables outline the activity in the allowance for loan losses by collateral type for the three months ended March 31, 2016 and 2015, and show both the allowances and portfolio balances for loans individually and collectively evaluated for impairment as of March 31, 2016 and 2015 (dollars in thousands).

	Three months ended March 31, 2016
	Construction &					1-4					Commercial		Commercial &
	Development			Farmland		Family			Multifamily		Real Estate		Industrial		Consumer			Total
Allowance for loan losses:
Beginning balance	$	644		$	22	$	1,213		$	246	$	2,156	$	513	$	1,334			6,128
Charge-offs		(7	)		-		(7	)		-		-		-		(142	)		(156	)
Recoveries		3			-		7			-		1		20		6			37
Provision		89			24		44			33		135		17		112			454
Ending balance	$	729		$	46	$	1,257		$	279	$	2,292	$	550	$	1,310		$	6,463
Ending allowance balance for loans individually evaluated for impairment		-			-		-			-		-		-		233			233
Ending allowance balance for loans collectively evaluated for impairment	$	729		$	46	$	1,257		$	279	$	2,292	$	550	$	1,077		$	6,230
Ending allowance balance for loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-	$	-	$	-	$	-		$	-
Loans receivable:
Balance of loans individually evaluated for impairment	$	1,215		$	-	$	1,824		$	-	$	625	$	18	$	795		$	4,477
Balance of loans collectively evaluated for impairment		94,138			6,366		160,488			33,609		315,134		74,972		108,438			793,145
Total period-end balance	$	95,353		$	6,366	$	162,312		$	33,609	$	315,759	$	74,990	$	109,233		$	797,622
Balance of loans acquired with deteriorated credit quality	$	685		$	-	$	809		$	1,052	$	-	$	-	$	37		$	2,583

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three months ended March 31, 2015
	Construction &					1-4				Commercial		Commercial &
	Development			Farmland		Family		Multifamily		Real Estate		Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	526		$	18	$	909	$	137	$	1,571	$	390		$	1,079		$	4,630
Charge-offs		(5	)		-		-		-		-		(56	)		(81	)		(142	)
Recoveries		1			-		3		-		-		180			7			191
Provision		116			5		112		27		387		(105	)		158			700
Ending balance	$	638		$	23	$	1,024	$	164	$	1,958	$	409		$	1,163		$	5,379
Ending allowance balance for loans individually evaluated for impairment		-			-		-		-		-		-			104			104
Ending allowance balance for loans collectively evaluated for impairment	$	638		$	23	$	1,024	$	164	$	1,958	$	409		$	1,059		$	5,275
Ending allowance balance for loans acquired with deteriorated credit quality	$	-		$	-	$	-	$	-	$	-	$	-		$	-		$	-
Loans receivable:
Balance of loans individually evaluated for impairment	$	1,511		$	-	$	1,842	$	1,066	$	862	$	119		$	730		$	6,130
Balance of loans collectively evaluated for impairment		72,460			3,270		137,945		18,153		236,746		58,684			113,051			640,309
Total period-end balance	$	73,971		$	3,270	$	139,787	$	19,219	$	237,608	$	58,803		$	113,781		$	646,439
Balance of loans acquired with deteriorated credit quality	$	753		$	-	$	833	$	1,065	$	-	$	-		$	44		$	2,695

Impaired Loans

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

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

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	March 31, 2016
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Construction and development	$	1,215	$	1,233	$	-
1-4 Family		1,824		1,856		-
Commercial real estate		625		640		-
Total mortgage loans on real estate		3,664		3,729		-
Commercial and industrial		18		18
Consumer		172		176		-
Total		3,854		3,923		-

With related allowance recorded:
Consumer		623		635		233
Total		623		635		233

Total loans:
Construction and development		1,215		1,233		-
1-4 Family		1,824		1,856		-
Commercial real estate		625		640		-
Total mortgage loans on real estate		3,664		3,729		-
Commercial and industrial		18		18		-
Consumer		795		811		233
Total	$	4,477	$	4,558	$	233

	December 31, 2015
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Construction and development	$	1,242	$	1,241	$	-
1-4 Family		1,419		1,416		-
Commercial real estate		630		629		-
Total mortgage loans on real estate		3,291		3,286		-
Consumer		159		159		-
Total		3,450		3,445		-

With related allowance recorded:
Consumer		595		595		220
Total		595		595		220

Total loans:
Construction and development		1,242		1,241		-
1-4 Family		1,419		1,416		-
Commercial real estate		630		629		-
Total mortgage loans on real estate		3,291		3,286		-
Consumer		754		754		220
Total	$	4,045	$	4,040	$	220

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	For the three months ended
	March 31, 2016				March 31, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Construction and development	$	1,226	$	10	$	1,902	$	4
1-4 Family		1,702		17		1,292		14
Commercial real estate		626		1		765		-
Total mortgage loans on real estate		3,554		28		3,959		18
Commercial and industrial		13		-		194		1
Consumer		204		2		135		1
Total		3,771		30		4,288		20

With related allowance recorded:
Consumer		574		3		243		-
Total		574		3		243		-

Total loans:
Construction and development		1,226		10		1,902		4
1-4 Family		1,702		17		1,292		14
Commercial real estate		626		1		765		-
Total mortgage loans on real estate		3,554		28		3,959		18
Commercial and industrial		13		-		194		1
Consumer		778		5		378		1
Total	$	4,345	$	33	$	4,531	$	20

Troubled Debt Restructurings

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

Loans classified as TDRs, consisting of twenty credits, totaled approximately $2.6 million at March 31, 2016 compared to eleven credits totaling approximately $2.2 million at December 31, 2015. Eighteen of the twenty TDRs were acquired. Ten of the restructured loans were considered TDRs due to modification of terms through adjustments to maturity, one restructured loan was considered a TDR due to modification of terms through principal payment forbearance, paying interest only for a specified period of time, and nine restructured loans were considered TDRs due to a reduction in the interest rate to a rate lower than the current market rate. At March 31, 2016, two of the TDRs were in default of their modified terms and are included in nonaccrual loans. The Company individually evaluates each TDR for allowance purposes, primarily based on collateral value, and excludes these loans from the loan population that is evaluated by applying qualitative factors.

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The table below presents the TDR pre- and post-modification outstanding recorded investments by loan categories for loans modified during the three month periods ended March 31, 2016 and 2015 (dollars in thousands).

	March 31, 2016						March 31, 2015
			Pre-		Post-			Pre-		Post-
			Modification		Modification			Modification		Modification
			Outstanding		Outstanding			Outstanding		Outstanding
	Number of		Recorded		Recorded		Number of	Recorded		Recorded
Troubled Debt Restructurings	Contracts		Investment		Investment		Contracts	Investment		Investment
Construction and development		-	$	-	$	-	1	$	26	$	26
1-4 Family	9			457		457	2		874		874
Total			$	457	$	457		$	900	$	900

There were no loans modified under troubled debt restructurings during the previous twelve month period that subsequently defaulted during the three months ended March 31, 2016 and 2015.

NOTE 6. STOCK-BASED COMPENSATION

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

Stock Options

The Company uses a Black-Scholes option pricing model to estimate the fair value of share-based awards. The Black-Scholes option pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility. Stock option expense in the accompanying consolidated statement of operations for the three months ended March 31, 2016 and 2015 were $43,000 and $31,000, respectively.

The assumptions presented below were used for the options granted during the three months ended March 31, 2016.


Expected dividends	0.22	%
Expected volatility	19.55	%
Risk-free interest rate	1.62	%
Expected term (in years)	7.0
Weighted-average grant date fair value	$3.44

At March 31, 2016, there was $0.9 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 4.3 years.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	Three months ended
	March 31, 2016				March 31, 2015
	Number		Weighted-Average		Number		Weighted-Average
	of Options		Exercise Price		of Options		Exercise Price

Outstanding at beginning of period		278,352	$	14.37		238,811	$	13.94
Granted		46,512		14.28		-		-
Forfeited		-		-		-		-
Exercised		-		-		-		-
Outstanding at end of period		324,864	$	14.36		238,811	$	13.94
Exercisable at end of period		47,351	$	13.82		22,811	$	13.33

At March 31, 2016, the shares underlying outstanding stock options and exercisable stock options had aggregate intrinsic values of $0.1 million and $40,000, respectively.

Time Vested Restricted Stock Awards

During the three months ended March 31, 2016 and 2015, the Company issued shares of time vested restricted stock with vesting terms ranging from two to five years. The total share-based compensation expense to be recognized for these awards is determined based on the market price of the Company’s common stock at the grant date applied to the total number of shares awarded and is amortized over the vesting period.

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

	Three months ended
	March 31, 2016					March 31, 2015
	Shares			Weighted Avg Grant Date Fair Value		Shares			Weighted Avg Grant Date Fair Value

Balance at beginning of period		60,592		$	14.85		42,889		$	13.96
Granted		54,175			14.66		6,486			14.00
Forfeited		(1,157	)		16.32		-			-
Earned and issued		(1,159	)		15.33		(392	)		14.00
Balance at end of period		112,451		$	14.74		48,983		$	13.96

At March 31, 2016, there was $1.4 million of unrecognized compensation cost related to time vested restricted stock awards that is expected to be recognized over a weighted average period of 3.9 years.

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS

The Company currently holds interest rate swap contracts to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the 1-month LIBOR associated with the forecasted issuances of 1-month fixed rate debt arising from a rollover strategy. An interest rate swap is an agreement whereby one party agrees to pay a fixed rate of interest on a notional principal amount in exchange for receiving a floating rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The maximum length of time over which the Company is currently hedging its exposure to the variability in future cash flows for forecasted transactions is approximately 4.4 years. The total notional amount of the derivative contracts is $40.0 million.

For the three months ended March 31, 2016 and 2015, a loss of $0.4 million and $0.2 million, respectively, has been recognized in other comprehensive income in the accompanying consolidated statements of comprehensive income for the change in fair value of the interest rate swaps. The swap contracts had a negative fair value of $1.3 million as of March 31, 2016 and have been recorded in accrued taxes and other liabilities in the accompanying consolidated balance sheets. The total accumulated loss of $0.8 million included in accumulated other comprehensive loss in the accompanying consolidated balance sheet would be reclassified to current

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

earnings if the hedge transactions become probable of not occurring. The Company expects the hedges to remain fully effective during the remaining term of the swap contracts.

NOTE 8. FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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

Fair Value Hierarchy

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

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

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

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

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

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

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

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

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

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

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

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

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

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

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value of Assets and Liabilities Measured on a Recurring Basis

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

			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	Estimated		Identical Assets		Observable Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2016
Assets:
Obligations of other U.S. government agencies	$	31,556	$	-	$	31,556	$	-
Obligations of state and political subdivisions		20,572		-		10,011		10,561
Corporate bonds		14,826		-		13,699		1,127
Residential mortgage-backed securities		59,233		-		59,233		-
Commercial mortgage-backed securities		1,280		-		1,280		-
Equity securities		1,103		1,103		-		-
Total assets	$	128,570	$	1,103	$	115,779	$	11,688
Liabilities:
Derivative financial instruments	$	1,272	$	-	$	1,272	$	-

December 31, 2015
Assets:
Obligations of other U.S. government agencies	$	26,473	$	-	$	26,473	$	-
Obligations of state and political subdivisions		21,467		-		11,072		10,395
Corporate bonds		14,824		-		13,688		1,136
Residential mortgage-backed securities		47,526		-		47,526		-
Commercial mortgage-backed securities		1,989		-		1,989		-
Equity securities		1,092		1,092		-		-
Total assets	$	113,371	$	1,092	$	100,748	$	11,531
Liabilities:
Derivative financial instruments	$	581	$	-	$	581	$	-

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

	Obligations of
	State and Political		Corporate
	Subdivisions		Bonds			Total

Balance at December 31, 2015	$	10,395	$	1,136		$	11,531
Realized gains (losses) included in net income		-		-			-
Unrealized gains (losses) included in other comprehensive income		166		(9	)		157
Purchases		-		-			-
Sales		-		-			-
Transfers into Level 3		-		-			-
Transfers out of Level 3		-		-			-
Balance at March 31, 2016	$	10,561	$	1,127		$	11,688

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value of Assets Measured on a Nonrecurring Basis

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

			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	Estimated		Identical Assets		Observable Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2016
Impaired loans	$	178	$	-	$	-	$	178
Total	$	178	$	-	$	-	$	178

December 31, 2015
Impaired loans	$	335	$	-	$	-	$	335
Other real estate owned		35		-		-		35
Total	$	370	$	-	$	-	$	370

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

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

	March 31, 2016
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	21,273	$	21,273	$	21,273	$	-	$	-
Federal funds sold		51		51		51		-		-
Investment securities		154,819		154,918		1,103		128,151		25,664
Other equity securities		7,183		7,183		-		7,183		-
Loans, net of allowance		791,159		795,546		-		-		795,546
Loans held for sale		50,921		50,921		-		-		50,921

Financial liabilities:
Deposits, noninterest-bearing	$	95,033	$	93,486	$	-	$	93,486	$	-
Deposits, interest-bearing		713,665		705,408		-		-		705,408
FHLB short-term advances and repurchase agreements		125,718		125,718		-		125,718		-
FHLB long-term advances		7,920		7,968		-		-		7,968
Junior subordinated debt		3,609		2,997		-		-		2,997
Derivative financial instruments		1,272		1,272		-		1,272		-

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	December 31, 2015
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	20,785	$	20,785	$	20,785	$	-	$	-
Federal funds sold		181		181		181		-		-
Investment securities		139,779		139,642		1,092		112,958		25,592
Other equity securities		5,835		5,835		-		5,835		-
Loans, net of allowance		739,313		738,614		-		-		738,614
Loans held for sale		80,509		80,509		-		-		80,509

Financial liabilities:
Deposits, noninterest-bearing	$	90,447	$	89,427	$	-	$	89,427	$	-
Deposits, interest-bearing		646,959		630,613		-		-		630,613
FHLB short-term advances and repurchase agreements		158,236		158,236		-		158,236		-
FHLB long-term advances		8,360		8,455		-		-		8,455
Junior subordinated debt		3,609		3,217		-		-		3,217
Derivative financial instruments		581		581		-		581		-

NOTE 9. INCOME TAXES

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

	Three months ended March 31,
	2016			2015
Income tax expense	$	1,006		$	965
Effective tax rate		33.6	%		33.1	%

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

NOTE 10. COMMITMENTS AND CONTINGENCIES

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

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

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

	March 31, 2016		December 31, 2015
Commitments to extend credit
Loan commitments	$	148,728	$	149,561
Standby letters of credit		372		382

Additionally, at March 31, 2016, the Company had unfunded commitments of $1.4 million for its investment in Small Business Investment Company qualified funds.

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

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

Overview

Through our wholly-owned subsidiary Investar Bank, we provide full banking services, excluding trust services, tailored primarily to meet the needs of individuals and small to medium-sized businesses in our primary areas of operation in South Louisiana: Baton Rouge, New Orleans, Lafayette, Hammond and their surrounding metropolitan areas. Our Bank commenced operations in 2006 and we completed our initial public offering in July 2014. Our strategy includes organic growth through high quality loans and growth through acquisitions. We currently operate 11 full service branches, including a branch in Baton Rouge, Louisiana opened in August 2014. We have completed construction of one new branch in Gonzales, Louisiana in our Baton Rouge market area and in September 2015, acquired land and a building for an additional branch in our New Orleans market area. We continue to focus on growing our deposit base in our markets. We completed acquisitions in 2011 and 2013 and regularly review acquisition opportunities.

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

Discussion and Analysis of Financial Condition

For the three months ended March 31, 2016, net income was $2.0 million, or $0.28 per basic and diluted share, compared to net income of $2.0 million, or $0.27 per basic and diluted share for the three months ended March 31, 2015. For the three months ended March 31, 2016, our net interest margin was 3.47%, return on average assets was 0.76% and return on average equity was 7.20%. From December 31, 2015 to March 31, 2016, total loans increased $52.2 million, or 7.0%, and total deposits increased $71.2 million, or 9.7%. Nonperforming loans to total loans decreased to 0.29% at March 31, 2016 from 0.32% at December 31, 2015. As of March 31, 2016, the Company and Bank each were in compliance with all regulatory capital requirements, and the Bank was considered “well-capitalized” under the FDIC’s prompt corrective action regulations.

Loans

General. Loans, excluding loans held for sale, or total loans, constitute our most significant asset, comprising 74.3% and 72.3% of our total assets at March 31, 2016 and December 31, 2015, respectively. Total loans increased $52.2 million, or 7.0%, to $797.6 million at March 31, 2016 from $745.4 million at December 31, 2015. Commercial and industrial loan growth remains a focus and has grown 7.2% from December 31, 2015.

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

	March 31, 2016					December 31, 2015
	Amount		Percentage of Total Loans			Amount		Percentage of Total Loans
Construction and development	$	95,353		12.0	%	$	81,863		11.0	%
1-4 Family		162,312		20.3			156,300		21.0
Multifamily		33,609		4.2			29,694		4.0
Farmland		6,366		0.8			2,955		0.4
Commercial real estate
Owner-occupied		141,583		17.8			137,752		18.5
Nonowner-occupied		174,176		21.8			150,831		20.2
Total mortgage loans on real estate		613,399		76.9			559,395		75.1
Commercial and industrial		74,990		9.4			69,961		9.4
Consumer		109,233		13.7			116,085		15.5
Total loans		797,622		100.0	%		745,441		100.0	%
Loans held for sale		50,921					80,509
Total gross loans	$	848,543				$	825,950

The following table sets forth loans outstanding at March 31, 2016, which, based on remaining scheduled repayments of principal, are due in the periods indicated. Loans with balloon payments and longer amortizations are often repriced and extended beyond the initial maturity when credit conditions remain satisfactory. Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported below as due in one year or less.

(dollars in thousands)	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years Through Fifteen Years		After Fifteen Years		Total
Construction and development	$	52,584	$	34,655	$	5,839	$	2,275	$	-	$	95,353
1-4 Family		8,664		26,550		51,882		35,398		39,818		162,312
Multifamily		1,304		12,989		17,605		126		1,585		33,609
Farmland		-		3,509		830		2,027		-		6,366
Commercial real estate
Owner-occupied		3,070		53,686		48,693		29,833		6,301		141,583
Nonowner-occupied		2,942		73,360		75,080		21,328		1,466		174,176
Total mortgage loans on real estate		68,564		204,749		199,929		90,987		49,170		613,399
Commercial and industrial		11,261		43,303		17,888		-		2,538		74,990
Consumer		2,141		81,396		25,303		393		-		109,233
Total loans	$	81,966	$	329,448	$	243,120	$	91,380	$	51,708	$	797,622

Loans Held for Sale. Loans held for sale include both consumer and mortgage loans and decreased $29.6 million, or 36.8%, to $50.9 million at March 31, 2016 from $80.5 million at December 31, 2015. The decrease in loans held for sale is mainly attributable to the sale of approximately $22.0 million of consumer loans held for sale during the first quarter of 2016. During the quarter ended December 31, 2015, the Bank announced that it was exiting the indirect auto loan origination business, the source of its consumer loans held for sale. The Bank discontinued accepting indirect auto loan applications on December 31, 2015, but continued to process and fund applications that were accepted on or before that date. As a result, the Bank experienced decreased loan sales, lower gains on sales of loans, and lower fee income on loans held for sale during the first quarter of 2016, which is expected to continue as the Bank sells the loans currently held for sale. For the three months ended March 31, 2016, we recognized gains from the sales of consumer loans of $0.3 million, compared to $1.2 million for the three months ended March 31, 2015. The Bank currently has the intent and ability to sell the balance of the consumer loans classified as held for sale at March 31, 2016; however, if this classification were to change, the loans would be transferred to the consumer loan portfolio.

One-to-four family mortgage loans not held in our portfolio are typically sold on a “best efforts” basis within 30 days after the loan is funded. This means that residential real estate originations are locked in at a contractual rate with a third-party investor or directly with government sponsored agencies, and we are obligated to sell the mortgage only if it is closed and funded. As a result, the risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. During the first quarter of 2016, the Bank significantly reduced its mortgage operations which impacted its originations of mortgage loans held for sale. Originations in the three months ended March 31, 2016 were $0.5 million compared to $17.0 million in the same period in 2015. The Bank does not intend to grow its mortgage lending operations and anticipates future mortgage loan production to remain at current levels. Although

loan fees and some interest income are derived from mortgage loans held for sale, the main source of income on these loans is gains from the loan sales in the secondary market which is recorded in gain on sale of loans, net on the consolidated statements of operations. For the three months ended March 31, 2016, we recognized gains from the sales of mortgage loans of $13,000, compared to $0.5 million for the three months ended March 31, 2015. The decrease in gains from the sales of mortgage loans is attributable to the decline in originations over the same periods.

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, 2016 and December 31, 2015, we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above. We continue to monitor our loan portfolio for exposure to potential negative impacts of low oil and gas prices. We consider our exposure to the energy sector not to be significant, at less than one percent of the total loan portfolio at March 31, 2016. However, should the price of oil and gas decline further and/or remain at the current low price for an extended period, the general economic conditions in our South Louisiana markets could be negatively affected and could negatively impact borrowers’ ability to service their debt.

Investment Securities

We purchase investment securities primarily to provide a source for meeting liquidity needs, with return on investment a secondary consideration. We also use investment securities as collateral for certain deposits and other types of borrowing. Investment securities represented 14.4% of our total assets and totaled $154.8 million at March 31, 2016, an increase of $15.0 million, or 10.8%, from $139.8 million at December 31, 2015. The increase in investment securities at March 31, 2016 compared to December 31, 2015 resulted from purchases of various investment types in our current portfolio to manage liquidity.

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

	March 31, 2016					December 31, 2015
	Balance		Percentage of Portfolio			Balance		Percentage of Portfolio
Obligations of other U.S. government agencies and corporations	$	35,545		23.0	%	$	30,460		21.8	%
Obligations of state and political subdivisions		34,517		22.3			35,515		25.4
Corporate bonds		14,826		9.6			14,824		10.6
Residential mortgage-backed securities		67,548		43.6			55,899		40.0
Commercial mortgage-backed securities		1,280		0.8			1,989		1.4
Equity securities		1,103		0.7			1,092		0.8
Total	$	154,819		100.0	%	$	139,779		100.0	%

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

The following table sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio as of March 31, 2016 (dollars in thousands).

	One Year or Less					After One Year Through Five Years					After Five Years Through Ten Years					After Ten Years
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Held to maturity:
Obligations of other U.S. government agencies and corporations	$	-		-	%	$	-		-	%	$	-		-	%	$	3,989		2.21	%
Residential mortgage-backed securities		-		-			-		-			-		-			8,315		2.57
Obligations of states and political subdivisions		655		7.17			2,950		7.17			3,575		7.17			6,765		4.38
Available for sale:
Obligations of other U.S. government agencies and corporations		-					1,503		2.54			4,148		2.59			25,502		2.39
Residential mortgage-backed securities		-					-		-			4,422		2.08			54,307		2.12
Commercial mortgage-backed securities		-				.			0.00			1,026		2.32			235		1.84
Obligations of states and political subdivisions		-					2,801		1.99			5,159		2.98			12,334		4.54
Corporate bonds		-					5,089		2.03			9,723		3.19			250		4.00
	$	655				$	12,343				$	28,053				$	111,697

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

Deposits

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

	March 31, 2016					December 31, 2015
	Amount		Percentage of Total Deposits			Amount		Percentage of Total Deposits
Noninterest-bearing demand deposits	$	95,033		11.8	%	$	90,447		12.3	%
NOW accounts		138,672		17.1			140,503		19.0
Money market deposit accounts		104,936		13.0			96,113		13.0
Savings accounts		52,285		6.5			53,735		7.3
Time deposits		417,772		51.6			356,608		48.4
Total deposits	$	808,698		100.0	%	$	737,406		100.0	%

Total deposits were $808.7 million at March 31, 2016, an increase of $71.3 million, or 9.7%, from December 31, 2015. The increase in total deposits was driven by an increase in noninterest-bearing deposits of $4.6 million, or 5.1%, an increase in money market accounts of $8.8 million, or 9.2%, and an increase in time deposits of $61.2 million, or 17.2%, from December 31, 2015. The increase in deposits at March 31, 2016 compared to December 31, 2015 resulted from organic growth in all of our markets. The Company’s focus on relationship banking, as well as management’s focus on growing the commercial and industrial loan portfolio and bringing in related deposits, continues to positively impact noninterest-bearing demand deposit growth.

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

	March 31, 2016				December 31, 2015
	Certificates of Deposit		Other Time Deposits		Certificates of Deposit		Other Time Deposits
Time remaining until maturity:
Three months or less	$	9,641	$	-	$	4,312	$	363
Over three months through six months		16,205		-		10,039		-
Over six months through twelve months		41,760		439		12,809		103
Over one year through three years		36,570		805		5,272		438
Over three years		4,804		-		1,468		-
	$	108,980	$	1,244	$	33,900	$	904

Borrowings

Total borrowings include securities sold under agreements to repurchase, advances from the Federal Home Loan Bank (“FHLB”), lines of credit with First National Bankers Bank (“FNBB”) and The Independent Bankers Bank (“TIB”), and junior subordinated debentures. Securities sold under agreements to repurchase decreased $9.4 million to $29.7 million at March 31, 2016 from $39.1 million at December 31, 2015. Our advances from the FHLB were $104.0 million at March 31, 2016, a decrease of $23.5 million, or 18.5%, from FHLB advances of $127.5 million at December 31, 2015. We had no funds drawn on the lines of credit at March 31, 2016 or December 31, 2015. The $3.6 million in junior subordinated debt at March 31, 2016 and December 31, 2015 represents the junior subordinated debentures that we assumed through acquisition.

The average balances and cost of funds of short-term borrowings for the three months ended March 31, 2016 and 2015 are summarized in the table below (dollars in thousands).

	Average Balances				Cost of Funds
	March 31, 2016		March 31, 2015		March 31, 2016			March 31, 2015
Federal funds purchased and other short-term borrowings	$	102,363	$	40,657		0.90	%		0.17	%
Securities sold under agreements to repurchase		30,476		12,747		0.20			0.20
Total short-term borrowings	$	132,839	$	53,404		0.73	%		0.18	%

Results of Operations

Performance Summary

Three months ended March 31, 2016 vs. three months ended March 31, 2015. For the three months ended March 31, 2016, net income was $2.0 million, or $0.28 per basic and diluted share, compared to net income of $2.0 million, or $0.27 per basic and diluted share for the three months ended March 31, 2015. Return on average assets decreased to 0.76% for the three months ended March 31, 2016 from 0.91% for the three months ended March 31, 2015 primarily as a result of the timing of consumer loan sales and the related gain on sale recognized in the first quarter of 2015. Return on average equity was 7.20% for the three months ended March 31, 2016 compared to 7.54% for the three months ended March 31, 2015.

Net Interest Income and Net Interest Margin

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

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

Three months ended March 31, 2016 vs. three months ended March 31, 2015. Net interest income increased 14.0% to $8.5 million for the three months ended March 31, 2016 from $7.5 million for the same period in 2015. Net interest margin was 3.47% for the three months ended March 31, 2016, down 24 basis points from 3.71% for the three months ended March 31, 2015. The increase in net interest income was a direct result of continued growth of the Company’s loan portfolio with an increase in net interest income of $1.5 million due to an increase in volume offset by a $0.5 million decrease related to a reduction in yield when compared to the first quarter of 2015. For the three months ended March 31, 2016, average loans and average investment securities increased approximately $118.0 million and $48.1 million, respectively, compared to the same period in 2015, while average interest bearing deposits and short- and long-term borrowings increased approximately $92.1 million and $64.3 million, respectively.

Interest income was $10.4 million for the three months ended March 31, 2016 compared to $8.8 million for the same period in 2015. Loan interest income made up substantially all of our interest income for the three months ended March 31, 2016 and 2015. The prolonged low interest rate environment contributed to a lower yield on earning assets, offset by the increases in interest-earning assets, described above. The overall yield on interest-earning assets decreased 14 basis points to 4.21% for the three months ended March 31, 2016 compared to 4.35% for the same period in 2015. The loan portfolio yielded 4.57% for the three months ended March 31, 2016 compared to 4.71% for the three months ended March 31, 2015, while the yield on the investment portfolio was 2.53% for the three months ended March 31, 2016 compared to 2.25% for the three months ended March 31, 2015.

Interest expense was $1.8 million for the three months ended March 31, 2016, an increase of $0.5 million compared to interest expense of $1.3 million for the three months ended March 31, 2015, as a result of an increase in the volume of interest-bearing liabilities. Average interest-bearing liabilities increased approximately $156.4 million for the three months ended March 31, 2016 as compared to the same period in 2015 as a result of our organic deposit growth to fund increased lending activity. The cost of interest-bearing liabilities increased ten basis points to 0.88% for the three months ended March 31, 2016 compared to 0.78% for the same period in 2015, primarily as a result of an increase in rates offered to our customers for time deposits.

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 March 31, 2016 and 2015. Averages presented in the table below are daily averages (dollars in thousands).

	Three months ended March 31,
	2016								2015
	Average Balance			Interest Income/ Expense⁽¹⁾		Yield/ Rate⁽¹⁾			Average Balance			Interest Income/ Expense⁽¹⁾		Yield/ Rate⁽¹⁾
Assets
Interest-earning assets:
Loans	$	832,368		$	9,485		4.57	%	$	714,338		$	8,298		4.71	%
Securities:
Taxable		113,446			712		2.52			68,528			366	2.17
Tax-exempt		22,199			144		2.60			18,979			119		2.54
Interest-earning balances with banks		20,766			37		0.71			18,031			17		0.38
Total interest-earning assets		988,779			10,378		4.21			819,876			8,800		4.35
Cash and due from banks		7,222								5,689
Intangible assets		3,179								3,209
Other assets		52,121								45,256
Allowance for loan losses		(6,308	)							(5,022	)
Total assets	$	1,044,993							$	869,008

Liabilities and stockholders' equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	239,844		$	380		0.64	%	$	204,728		$	310		0.61	%
Savings deposits		53,144			88		0.66			55,729			94		0.68
Time deposits		383,838			1,047		1.09			324,240			788		0.99
Total interest-bearing deposits		676,826			1,515		0.90			584,697			1,192		0.83
Short-term borrowings		132,839			243		0.73			53,404			24		0.18
Long-term debt		26,667			73		1.10			41,790			85		0.82
Total interest-bearing liabilities		836,332			1,831		0.88			679,891			1,301		0.78
Noninterest-bearing deposits		87,319								77,226
Other liabilities		10,469								6,975
Stockholders' equity		110,873								104,916
Total liabilities and stockholders’ equity	$	1,044,993							$	869,008
Net interest income/net interest margin				$	8,547		3.47	%				$	7,499		3.71	%

⁽¹⁾	Interest income and net interest margin are expressed as a percentage of average interest-earning assets outstanding for the indicated periods. Interest expense is expressed as a percentage of average interest-bearing liabilities for the indicated periods.

Volume/Rate Analysis. The following table sets forth a summary of the changes in interest earned and interest paid resulting from changes in volume and rates for the three months ended March 31, 2016 compared to the same period in 2015 (dollars in thousands).

	Three months ended March 31, 2016 vs. three months ended March 31, 2015
	Volume			Rate			Net⁽¹⁾

Interest income:
Loans	$	1,386		$	(199	)	$	1,187
Securities:
Taxable		243			103			346
Tax-exempt		20			5			25
Interest-earning balances with banks		2			18			20
Total interest-earning assets		1,651			(73	)		1,578

Interest expense:
Interest-bearing demand deposits		54			16			70
Savings deposits		(4	)		(2	)		(6	)
Time deposits		147			112			259
Short-term borrowings		36			183			219
Long-term debt		(31	)		19			(12	)
Total interest-bearing liabilities		202			328			530
Change in net interest income	$	1,449		$	(401	)	$	1,048

⁽¹⁾	Changes in interest due to both volume and rate have been allocated on a pro-rata basis using the absolute ratio value of amounts calculated.

Noninterest Income

Noninterest income includes, among other things, fees generated from our deposit services and loans originated and held for sale, gain on sale of investment securities, and gains on the sales of consumer and mortgage loans. We expect to continue to develop new products that generate noninterest income, and enhance our existing products, in order to diversify our revenue sources.

Three months ended March 31, 2016 vs. three months ended March 31, 2015. Total noninterest income decreased $1.2 million, or 49.3%, to $1.3 million for the three months ended March 31, 2016 compared to $2.5 million for the three months ended March 31, 2015. The decrease in noninterest income is mainly attributable to the $1.4 million decrease in gain on sale of loans when compared to the three months ended March 31, 2015. As discussed in Loans above, gain on sale of loans decreased due to the Bank’s decision in November 2015 to exit the indirect auto loan origination business and due to the reduction in mortgage operations in the first quarter of 2016.

Fee income on loans held for sale decreased to $0.1 million for the three months ended March 31, 2016 from $0.3 million for the same period in 2015 due to the decrease in originations of both consumer and mortgage loans held for sale, as discussed in Loans above.

Other operating income primarily consists of loan servicing fees, interchange fees, and ATM surcharge income. Other operating income was $0.7 million for the three months ended March 31, 2016 compared to $0.4 million for the same period in 2015. The increase is mainly a result of a $0.2 million increase in servicing fees due to the growth in our servicing portfolio.

Noninterest Expense

Three months ended March 31, 2016 vs. three months ended March 31, 2015. Total noninterest expense was $6.4 million for the three months ended March 31, 2016, a decrease of $40,000, or 0.6%, compared to the same period in 2015. Although we are focused on growth, both organically and through acquisition, we are committed to managing our costs within the framework of our operating strategy.

Income Tax Expense

Income tax expense for the three months ended March 31, 2016 was $1.0 million, an increase of $41,000, compared to the three months ended March 31, 2015. The effective tax rate for the three months ended March 31, 2016 and 2015 was 33.6% and 33.1%, respectively.

Risk Management

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

Credit Risk and the Allowance for Loan Losses

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

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

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

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

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

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

At March 31, 2016 and December 31, 2015, there were no loans classified as doubtful or loss, while there were $6.5 million and $6.7 million, respectively, of loans classified as substandard. At both March 31, 2016 and December 31, 2015, $1.4 million of loans were classified as special mention. Of our substandard and special mention loans at both March 31, 2016 and December 31, 2015, $1.6 million were acquired and marked to fair value at the time of their acquisition.

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

If our collection efforts are unsuccessful, collateral securing loans may be repossessed and sold or, for loans secured by real estate, foreclosure proceedings initiated. The collateral is sold at public auction for fair market value (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 Loan Losses. The allowance for loan losses is an amount that management believes will be adequate to absorb probable losses inherent in the entire loan portfolio. The appropriate level of the allowance is based on an ongoing analysis of the loan portfolio and represents an amount that management deems adequate to provide for inherent losses, including collective impairment as recognized under ASC 450, Contingencies. Collective impairment is calculated based on loans grouped by grade. Another component of the allowance is losses on loans assessed as impaired under ASC 310, Receivables. The balance of these loans and their related allowance is included in management’s estimation and analysis of the allowance for loan losses. Other considerations in establishing the allowance for loan losses include the nature and volume of the loan portfolio, overall portfolio quality, historical loan loss, review of specific problem loans and current economic conditions that may affect our borrowers’ ability to pay, as well as trends within each of these factors. The allowance for loan losses is established after input from management as well as our risk management department and our special assets committee. We evaluate the adequacy of the allowance for loan losses on a quarterly basis. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses was $6.5 million at March 31, 2016, up from $6.1 million at December 31, 2015, as we increased our loan loss provisioning to reflect our organic loan growth.

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

Impaired loans at March 31, 2016 were $4.5 million, including impaired loans acquired through acquisition in the amount of $1.9 million, compared to $4.0 million, including impaired loans acquired through acquisition in the amount of $1.5 million, at December 31, 2015. At both March 31, 2016 and December 31, 2015, $0.2 million of the allowance for loan losses was specifically allocated to impaired loans.

The provision for loan losses is a charge to income in an amount that management believes is necessary to maintain an adequate allowance for loan losses. The provision is based on management’s regular evaluation of current economic conditions in our specific markets as well as regionally and nationally, changes in the character and size of the loan portfolio, underlying collateral values securing loans, and other factors which deserve recognition in estimating loan losses. For the three months ended March 31, 2016 and 2015, the provision for loan losses was $0.5 million and $0.7 million, respectively.

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

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

	March 31, 2016		December 31, 2015
Construction and development	$	729	$	644
1-4 Family		1,257		1,213
Multifamily		279		246
Farmland		46		22
Commercial real estate		2,292		2,156
Total mortgage loans on real estate		4,603		4,281
Commercial and industrial		550		513
Consumer		1,310		1,334
Total	$	6,463	$	6,128

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

	Three months ended March 31,
	2016			2015
Allowance at beginning of period	$	6,128		$	4,630
Provision for loan losses		454			700
Charge-offs:
Mortgage loans on real estate:
Construction and development		(7	)		(5	)
1-4 Family		(7	)		-
Commercial and industrial		-			(56	)
Consumer		(142	)		(81	)
Total charge-offs		(156	)		(142	)
Recoveries
Mortgage loans on real estate:
Construction and development		3			1
1-4 Family		7			3
Commercial real estate		1			-
Commercial and industrial		20			180
Consumer		6			7
Total recoveries		37			191
Net (charge-offs) recoveries		(119	)		49
Balance at end of period	$	6,463		$	5,379

Net charge-offs to:
Loans - average		0.02	%		-0.01	%
Allowance for loan losses		1.84	%		-0.91	%
Allowance for loan losses to:
Total loans		0.81	%		0.83	%
Nonperforming loans		279.75	%		178.42	%

The allowance for loan losses to total loans ratio decreased to 0.81% at March 31, 2016 compared to 0.83% at March 31, 2015. The allowance for loan losses to nonperforming loans ratio increased to 279.75% at March 31, 2016 from 178.42% at March 31, 2015.

Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for loan losses. Net charge-offs for the three months ended March 31, 2016 were $0.1 million, equal to 0.02% of our average loan balances as of that date. Net recoveries for the three months ended March 31, 2015 were $49,000, equal to 0.01% of our average loan balances as of that date.

Management believes the allowance for loan losses at March 31, 2016 is sufficient to provide adequate protection against losses in our portfolio. Although the allowance for loan losses is considered adequate by management, there can be no assurance that this allowance

will prove to be adequate over time to cover ultimate losses in connection with our loans. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries. Our results of operations and financial condition could be materially adversely affected to the extent that the allowance is insufficient to cover such changes or events.

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

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

There were twenty loans classified as TDRs at March 31, 2016 that totaled approximately $2.6 million compared to eleven credits totaling approximately $2.2 million at December 31, 2015. Eighteen of the twenty TDRs were acquired through acquisition. Ten of the twenty restructured loans were considered TDRs due to a modification of terms through adjustments to maturity, one restructured loan was considered a TDR due to a modification of terms through principal payment forbearance, paying interest only for a specified period of time, and nine restructured loans were considered TDRs due to a reduction in the interest rate to a rate lower than the current market rate. As of March 31, 2016, two of the restructured loans with a balance of $0.4 million were in default of their modified terms and had been placed on nonaccrual. As of December 31, 2015, three of the restructured loans with a balance of $0.5 million were in default of their modified terms and had been placed on nonaccrual.

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

	March 31, 2016		December 31, 2015
Nonaccrual loans	$	2,310	$	2,411
Accruing loans past due 90 days or more		-		-
Total nonperforming loans		2,310		2,411
Restructured loans		2,167		1,629
Total nonperforming and restructured loans	$	4,477	$	4,040
Interest income recognized on nonperforming and restructured loans	$	33	$	174
Interest income foregone on nonperforming and restructured loans	$	79	$	252

Of the total nonaccrual loans at March 31, 2016 and December 31, 2015, $1.0 million and $1.1 million, respectively, were acquired through acquisition. Nonperforming loans are comprised of accruing loans past due 90 days or more and nonaccrual loans. Nonperforming loans outstanding represented 0.29% and 0.32% of total loans at March 31, 2016 and December 31, 2015, respectively. Nonperforming loans, other than those acquired through an acquisition and nonperforming acquired loans represented 0.17% and 0.12%, respectively, of total loans at March 31, 2016.

Other Real Estate Owned. Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged to the allowance for loan losses. Other real estate owned with a cost basis of $60,500 and $0.4 million was sold during the three months ended March 31, 2016 and 2015, respectively, resulting in a

net gain of $1,000 and a net loss of $1,000 for the respective periods. At both March 31, 2016 and December 31, 2015, $0.6 million of our other real estate owned was related to loans acquired through acquisition.

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

	March 31, 2016		December 31, 2015

Construction and development	$	556	$	616
1-4 Family		139		109
Total other real estate owned	$	695	$	725

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

	Three months ended			Three months ended
	March 31, 2016			March 31, 2015
Balance, beginning of period	$	725		$	2,735
Transfers from loans		-			218
Transfers from acquired loans		30			45
Sales of other real estate owned		(60	)		(417	)
Write-downs		-			(13	)
Balance, end of period	$	695		$	2,568

Interest Rate Risk

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

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

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

Within the gap position that management directs, we attempt to structure our assets and liabilities to minimize the risk of either a rising or falling interest rate environment. We manage our gap position for time horizons of one month, two months, three months, 4-6 months, 7-12 months, 13-24 months, 25-36 months, 37-60 months and more than 60 months. The goal of our asset/liability management is for the Bank to maintain a net interest income at risk in an up or down 100 basis point environment at less than (5)%. At March 31, 2016, the Bank was within the policy guidelines for asset/liability management.

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

As of March 31, 2016
Changes in Interest Rates (in basis points)	Estimated Increase/Decrease in Net Interest Income ⁽¹⁾
+300		(3.4	)%
+200		(2.1	)%
+100		(1.1	)%
-100		4.5	%
-200		4.3	%
-300		4.3	%

⁽¹⁾	The percentage change in this column represents the projected net interest income for 12 months on a flat balance sheet in a stable interest rate environment versus the projected net interest income in the various rate scenarios.

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

Liquidity and Capital Resources

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

Our core deposits, which are deposits excluding time deposits greater than $250,000 and deposits of municipalities and other political entities, are our most stable source of liquidity to meet our cash flow needs due to the nature of the long-term relationships generally established with our customers. Maintaining the ability to acquire these funds as needed in a variety of markets, and within ALCO compliance targets, is essential to ensuring our liquidity. At March 31, 2016 and December 31, 2015, 73.2% and 69.4% of our total assets, respectively, were funded by core deposits.

Our investment portfolio is another alternative for meeting our cash flow requirements. Investment securities generate cash flow through principal payments and maturities, and they generally have readily available markets that allow for their conversion to cash. Some securities are pledged to secure certain deposit types or short-term borrowings, such as FHLB advances, which impacts their liquidity. At March 31, 2016, securities with a carrying value of $100.8 million were pledged to secure deposits, borrowings, and other liabilities, compared to $88.1 million in pledged securities as of December 31, 2015.

Other sources available for meeting liquidity needs include advances from the FHLB, repurchase agreements and other borrowings. FHLB advances are primarily used to match-fund fixed rate loans in order to minimize interest rate risk and also may be used to meet day to day liquidity needs, particularly if the prevailing interest rate on an FHLB advance compares favorably to the rates that we would be required to pay to attract deposits. At March 31, 2016, the balance of our outstanding advances with the FHLB was $104.0 million, a decrease from $127.5 million at December 31, 2015. The total amount of the remaining credit available to us from the FHLB at March 31, 2016 was $240.2 million. Repurchase agreements are contracts for the sale of securities which we own with a corresponding agreement to repurchase those securities at an agreed upon price and date. Our policies limit the use of repurchase agreements to those collateralized by U.S. Treasury and agency securities. We had $29.7 million of repurchase agreements outstanding as of March 31, 2016, compared to $39.1 million of outstanding repurchase agreements as of December 31, 2015. Finally,

we maintain lines of credit with other commercial banks totaling $35.0 million. The lines of credit mature at various times within the next twelve months. There were no amounts outstanding under these lines of credit at March 31, 2016 or December 31, 2015.

Our liquidity strategy is focused on using the least costly funds available to us in the context of our balance sheet composition and interest rate risk position. Accordingly, we target growth of noninterest-bearing deposits. Although we cannot directly control the types of deposit instruments our customers choose, we can influence those choices with the interest rates and deposit specials we offer. We do not hold any brokered deposits, as defined for federal regulatory purposes, although we do hold QwikRate^® deposits which we obtain via the internet to address liquidity needs when rates on such deposits compare favorably with deposit rates in our markets. At March 31, 2016, we held $112.1 million of QwikRate^® deposits, up from $79.3 million at December 31, 2015.

The following table presents, by type, our funding sources, which consist of total average deposits and borrowed funds, as a percentage of total funds and the total cost of each funding source for the three months ended March 31, 2016 and 2015:

	Percentage of Total Average Deposits						Cost of Funds
	Three months ended March 31,						Three months ended March 31,
	2016			2015			2016			2015
Noninterest-bearing demand deposits		9	%		10	%		-			-	%
Interest-bearing demand deposits		26			27			0.6			0.6
Savings accounts		6			7			0.7			0.7
Time deposits		42			43			1.1			1.0
Short-term borrowings		14			7			0.7			0.2
Long-term borrowed funds		3			6			1.1			0.8
Total deposits and borrowed funds		100	%		100	%		0.80	%		0.69	%

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

Capital Tiers	Tier 1 Leverage Ratio	Common Equity Tier 1 Capital Ratio	Tier 1 Capital Ratio	Total Capital Ratio
Well capitalized	5% or above	6.5% or above	8% or above	10% or above
Adequately capitalized	4% or above	4.5% or above	6% or above	8% or above
Undercapitalized	Less than 4%	Less than 4.5%	Less than 6%	Less than 8%
Significantly undercapitalized	Less than 3%	Less than 3%	Less than 4%	Less than 6%
Critically undercapitalized			2% or less

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

	Actual					Minimum Capital Requirement to be Well Capitalized
	Amount		Ratio			Amount		Ratio

March 31, 2016
Investar Holding Corporation:
Tier 1 leverage capital	$	112,140		10.78	%	$	-		-	%
Common equity tier 1 risk-based capital		108,640		11.49			-		-
Tier 1 risk-based capital		112,140		11.86			-		-
Total risk-based capital		118,603		12.54			-		-
Investar Bank:
Tier 1 leverage capital		109,250		10.52			51,936		5.00
Common equity tier 1 risk-based capital		109,250		11.57			61,397		6.50
Tier 1 risk-based capital		109,250		11.57			75,566		8.00
Total risk-based capital		115,713		12.25			94,457		10.00

December 31, 2015
Investar Holding Corporation:
Tier 1 leverage capital	$	110,574		11.39	%	$	-		-	%
Common equity tier 1 risk-based capital		107,074		11.67			-		-
Tier 1 risk-based capital		110,574		12.05			-		-
Total risk-based capital		116,702		12.72			-		-
Investar Bank:
Tier 1 leverage capital		107,209		11.07			48,436		5.00
Common equity tier 1 risk-based capital		107,209		11.71			59,511		6.50
Tier 1 risk-based capital		107,209		11.71			73,244		8.00
Total risk-based capital		113,337		12.38			91,555		10.00

Off-Balance Sheet Transactions

The Bank entered into interest rate swap contracts to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the 1-month LIBOR associated with the forecasted issuances of 1-month fixed rate debt arising from a rollover strategy. An interest rate swap is an agreement whereby one party agrees to pay a fixed rate of interest on a notional principal amount in exchange for receiving a floating rate of interest on the same notional amount for a predetermined period of time, from a second party. The maximum length of time over which the Bank is currently hedging its exposure to the variability in future cash flows for forecasted transactions is approximately 4.4 years. The total notional amount of the derivative contracts is $40.0 million.

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

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

	March 31, 2016		December 31, 2015

Commitments to extend credit:
Loan commitments	$	148,728	$	149,561
Standby letters of credit		372		382

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

Additionally, at March 31, 2016, the Company had unfunded commitments of $1.4 million for its investment in Small Business Investment Company qualified funds.

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

Contractual Obligations

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

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

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

PART II. OTHER INFORMATION

Item 1A. Risk Factors

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

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

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

The table below provides the information with respect to purchases made by the Company of shares of its common stock during each of the months during the three month period ended March 31, 2016.

Period	(a) Total Number of Shares (or Units) Purchased⁽¹⁾		(b) Average Price Paid per Share (or Unit)		(c ) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs⁽²⁾		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Be Purchased Under the Plans or Programs⁽²⁾
January 1, 2016 to January 29, 2016		27	$	17.72		-		213,144
February 1, 2016 to February 29, 2016		13,170		15.48		13,144		200,000
March 1, 2016 to March 31, 2016		7,674		14.73		7,550		192,450
		20,871	$	15.21		20,694		192,450

⁽¹⁾	Includes 177 shares surrendered to cover the payroll taxes due upon the vesting of restricted stock.

⁽²⁾	On February 19, 2015, the Company announced that its board of directors had authorized the repurchase of up to 250,000 shares of the Company’s common stock in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws.

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

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

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

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

Item 6. Exhibits

Exhibit No.		Description of Exhibit

3.1		Restated Articles of Incorporation of Investar Holding Corporation⁽¹⁾

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

4.1		Specimen Common Stock Certificate⁽³⁾

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

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

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

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

⁽²⁾	Filed as exhibit 3.2 to the Pre-Effective Amendment No. 1 to Registration Statement on Form S-1 of the Company filed with the SEC on June 4, 2014 and incorporated herein by reference.

⁽³⁾	Filed as exhibit 4.1 to the Registration Statement on Form S-1 of the Company filed with the SEC on May 16, 2014 and incorporated herein by reference.

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

SIGNATURES

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

		INVESTAR HOLDING CORPORATION

Date: May 5, 2016		/s/ John J. D’Angelo
		John J. D’Angelo
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 5, 2016		/s/ Christopher L. Hufft
		Christopher L. Hufft
		Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT INDEX

Exhibit No.		Description of Exhibit

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

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

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document