The holding company for Investar Bank has killed its plans to acquire an Alabama bank, according to the quarterly report Investar released yesterday, in which the bank reported second-quarter earnings of $4.3 million, or 39 cents per share, down from the $4.9 million, or 48 cents per share, from the same quarter in 2019.
Late last year, Investar Holding Corp. entered into an agreement to acquire Cheaha Financial Group Inc., headquartered in Oxford, Alabama, and its wholly owned subsidiary, Cheaha Bank. The deal would’ve given Investar four branch locations in Alabama totaling some $207 million in assets and $177 million in deposits.
However, at the end of the second quarter, Investar provided Cheaha with a notice of termination of the agreement after economic conditions resulting from the COVID-19 pandemic “made it impractical for the company to complete the strategic transaction contemplated by the agreement,” the report reads.
The company’s cost of funds continued to decline throughout the quarter, a trend Investar Bank President and CEO John D’Angelo believes will continue through 2020.
“Our company is internally focused on protecting our balance sheet, maintaining strong capital levels and credit quality, and seeking opportunities to improve efficiency through technology, as we believe investments in technology can substantially improve our operating results,” D’Angelo says in a prepared statement. “Reducing our cost of funds has been a long-term goal of the board and management, and we continue to make progress bringing this cost more in line with our peers.”
At the end of the quarter, Investar announced the closure of a Zachary branch, which will shut down in the fourth quarter, due to “its close proximity to other existing branch locations.” The company has also had to reduce staff at certain other branches, resulting in a severance charge of $300,000 for the quarter.
Despite the negative influence of the pandemic, D’Angelo says he’s pleased with the bank’s Q2 results, noting the company originated 998 Paycheck Protection Program loans totaling $109.5 million in the period, 85% of which have principal balances of $150,000 or less. Recognizing a shift in customer preferences, the bank also plans greater use of its digital banking platforms.
Among other Q2 highlights:
- Revenue, including interest and noninterest income, rose to $27.7 million in the second quarter, up nearly 15% from a year ago.
- Total loans reached $1.8 billion, compared with $1.5 billion in Q2 of 2019, a 17.5% increase.
- Total deposits jumped to $1.9 billion in Q2, up 21.7% from the $1.6 billion in deposits the same time last year.
- At the end of Q2, the company had $490.3 million, or 27% of the total loan portfolio, on its 90-day loan deferral program; as of July 22, the balance of loans remaining on the deferral plan was approximately $116.5 million, or 6% of the total loan portfolio.
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