Equibles

10-Q

Investar Holding Corp (ISTR)

10-Q 2025-08-06 For: 2025-06-30
View Original
Added on April 10, 2026

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

_____________________________________

FORM 10-Q

_____________________________________

(Mark One)

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

For the quarterly period ended June 30, 2025

or

☐ 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<br> incorporation or organization) (I.R.S. Employer<br> Identification No.)

10500 Coursey Boulevard, Baton Rouge, Louisiana 70816

(Address of principal executive offices, including zip code)

(225) 227-2222

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $1.00 par value per share ISTR The Nasdaq Global Market

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  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

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

Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares outstanding of the issuer’s class of common stock, as of the latest practicable date, is as follows: Common stock, $1.00 par value, 9,827,751 shares outstanding as of August 4, 2025.

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TABLE OF CONTENTS

Part I. Financial Information
Item 1. Financial Statements (Unaudited) 4
Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 4
Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024 5
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and 2024 6
Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024 7
Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 8
Notes to the Consolidated Financial Statements 10
Note 1. Summary of Significant Accounting Policies 10
Note 2. Earnings Per Share 11
Note 3. Investment Securities 12
Note 4. Loans and Allowance for Credit Losses 15
Note 5. Stockholders’ Equity 24
Note 6. Stock-Based Compensation 25
Note 7. Derivative Financial Instruments 27
Note 8. Fair Values of Financial Instruments 28
Note 9. Income Taxes 33
Note 10. Commitments and Contingencies 33
Note 11. Leases 34
Note 12. Subsequent Events 35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
Item 3. Quantitative and Qualitative Disclosures about Market Risk 60
Item 4. Controls and Procedures 60
Part II. Other Information
Item 1A. Risk Factors 61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 61
Item 6. Exhibits 63
Signatures 64

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GLOSSARY OF DEFINED TERMS

Below is a listing of certain acronyms, abbreviations and defined terms, among others, used throughout this Quarterly Report on Form 10-Q.

Series A Preferred Stock – 6.5% Series A Non-Cumulative Perpetual Convertible Preferred Stock
2029 Notes – 5.125% Fixed-to-Floating Rate Subordinated Notes due 2029
2032 Notes – 5.125% Fixed-to-Floating Rate Subordinated Notes due 2032
ACL – Allowance for Credit Losses
AFS – Available For Sale
ALCO – Asset/Liability Committee
Annual Report – Investar Holding Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 12, 2025
ASC – Accounting Standards Codification
ASU – Accounting Standards Update
ATM – Automated Teller Machine
Bank – Investar Bank, National Association
Board – Board of Directors of Investar Holding Corporation
BOLI – Bank Owned Life Insurance
BTFP – Bank Term Funding Program
CECL – Current Expected Credit Loss
CODM – Chief Operating Decision Maker
Company – Investar Holding Corporation and its wholly-owned subsidiary the Bank (also, “we,” “our,” or “us”)
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
FHLB – Federal Home Loan Bank
FRB – Federal Reserve Bank of Atlanta
GAAP – U.S. Generally Accepted Accounting Principles
HTM – Held To Maturity
MD&A – Management’s Discussion and Analysis of Financial Condition and Results of Operations
NAICS – North American Industry Classification System
OBBBA – One Big Beautiful Bill Act
OCC – Office of the Comptroller of the Currency
ROU – Right-Of-Use
RSU – Restricted Stock Unit
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
SBIC – Small Business Investment Company
SOFR – Secured Overnight Financing Rate
WFB – Wichita Falls Bancshares, Inc.
U.S. – United States

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INVESTAR HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

December 31, 2024
ASSETS **** ****
Cash and due from banks 28,311 $ 26,623
Interest-bearing balances due from other banks 26,913 1,299
Cash and cash equivalents 55,224 27,922
Available for sale securities at fair value (amortized cost of 408,599 and 392,564, respectively) 355,708 331,121
Held to maturity securities at amortized cost (fair value of 43,690 and 42,144, respectively) 41,528 42,687
Loans 2,106,355 2,125,084
Less: allowance for credit losses (26,620 ) (26,721 )
Loans, net 2,079,735 2,098,363
Equity securities at fair value 2,570 2,593
Nonmarketable equity securities 15,082 16,502
Bank premises and equipment, net of accumulated depreciation of 22,776 and 21,853, respectively 39,894 40,705
Other real estate owned, net 5,629 5,218
Accrued interest receivable 14,028 14,423
Deferred tax asset 15,328 17,120
Goodwill and other intangible assets, net 41,427 41,696
Bank owned life insurance 60,627 59,703
Other assets 21,285 24,759
Total assets 2,748,065 $ 2,722,812
LIABILITIES **** ****
Deposits:
Noninterest-bearing 448,459 $ 432,143
Interest-bearing 1,889,726 1,913,801
Total deposits 2,338,185 2,345,944
Advances from Federal Home Loan Bank 70,000 67,215
Repurchase agreements 11,023 8,376
Subordinated debt, net of unamortized issuance costs 16,717 16,697
Junior subordinated debt 8,782 8,733
Accrued taxes and other liabilities 47,429 34,551
Total liabilities 2,492,136 2,481,516
Commitments and contingencies (Note 10)
STOCKHOLDERS’ EQUITY **** ****
Preferred stock, no par value per share; 5,000,000 shares authorized; none issued or outstanding — —
Common stock, 1.00 par value per share; 40,000,000 shares authorized; 9,839,848 and 9,828,413 shares issued and outstanding, respectively 9,840 9,828
Surplus 146,107 146,890
Retained earnings 141,608 132,935
Accumulated other comprehensive loss (41,626 ) (48,357 )
Total stockholders’ equity 255,929 241,296
Total liabilities and stockholders’ equity 2,748,065 $ 2,722,812

All values are in US Dollars.

See accompanying notes to the consolidated financial statements.

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INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except share data)

(Unaudited)

Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
INTEREST INCOME **** **** ****
Interest and fees on loans $ 31,140 $ 32,161 $ 61,692 $ 64,296
Interest on investment securities:
Taxable 2,961 2,766 5,640 5,583
Tax-exempt 665 214 1,336 452
Other interest income 593 649 1,125 1,181
Total interest income 35,359 35,790 69,793 71,512
INTEREST EXPENSE **** **** ****
Interest on deposits 14,456 14,865 29,096 29,710
Interest on borrowings 1,259 3,727 2,708 7,388
Total interest expense 15,715 18,592 31,804 37,098
Net interest income 19,644 17,198 37,989 34,414
Provision for credit losses 141 (415 ) (3,455 ) (1,834 )
Net interest income after provision for credit losses 19,503 17,613 41,444 36,248
NONINTEREST INCOME **** **** ****
Service charges on deposit accounts 788 799 1,583 1,609
Loss on call or sale of investment securities, net — (383 ) — (383 )
(Loss) gain on sale or disposition of fixed assets, net — — (3 ) 427
Gain on sale of other real estate owned, net 29 712 29 712
Interchange fees 401 410 791 805
Income from bank owned life insurance 476 463 924 851
Change in the fair value of equity securities 53 — (23 ) 80
Other operating income 879 749 1,336 1,397
Total noninterest income 2,626 2,750 4,637 5,498
Income before noninterest expense 22,129 20,363 46,081 41,746
NONINTEREST EXPENSE **** **** ****
Depreciation and amortization 710 787 1,431 1,599
Salaries and employee benefits 10,257 9,593 19,860 18,841
Occupancy 675 696 1,316 1,277
Data processing 914 893 1,811 1,830
Marketing 112 72 223 113
Professional fees 468 471 1,059 890
Gain on early extinguishment of subordinated debt — (287 ) — (502 )
Acquisition expense 182 — 341 —
Other operating expenses 3,382 3,252 6,897 6,725
Total noninterest expense 16,700 15,477 32,938 30,773
Income before income tax expense 5,429 4,886 13,143 10,973
Income tax expense 935 829 2,356 2,209
Net income $ 4,494 $ 4,057 $ 10,787 $ 8,764
EARNINGS PER SHARE **** **** ****
Basic earnings per share $ 0.46 $ 0.41 $ 1.10 $ 0.89
Diluted earnings per share 0.46 0.41 1.09 0.89
Cash dividends declared per common share 0.11 0.10 0.215 0.20

See accompanying notes to the consolidated financial statements.

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INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

Six months ended June 30,
2024 2025 2024
Net income 4,494 $ 4,057 $ 10,787 $ 8,764
Other comprehensive income (loss):
Investment securities:
Unrealized gain (loss), available for sale, net of tax expense (benefit) of 339, (108), 1,821 and (1,139), respectively 1,253 (407 ) 6,731 (4,217 )
Reclassification of realized loss, available for sale, net of tax benefit of 0, 80, 0 and 80, respectively — 303 — 303
Total other comprehensive income (loss) 1,253 (104 ) 6,731 (3,914 )
Total comprehensive income 5,747 $ 3,953 $ 17,518 $ 4,850

All values are in US Dollars.

See accompanying notes to the consolidated financial statements.

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INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

(Unaudited)

**** **** **** Accumulated ****
**** **** **** Other Total
**** Retained Comprehensive Stockholders’
Surplus Earnings (Loss) Income Equity
Three months ended: **** **** **** **** ****
June 30, 2024 **** **** **** **** ****
Balance at beginning of period 9,782 $ 145,739 $ 120,441 $ (48,957 ) $ 227,005
Surrendered shares (87 ) (1,270 ) — — (1,357 )
Options exercised 82 1,081 — — 1,163
Dividends declared, 0.10 per share — — (988 ) — (988 )
Stock-based compensation 58 456 — — 514
Shares repurchased (6 ) (88 ) — — (94 )
Net income — — 4,057 — 4,057
Other comprehensive loss, net — — — (104 ) (104 )
Balance at end of period 9,829 $ 145,918 $ 123,510 $ (49,061 ) $ 230,196
June 30, 2025 **** **** **** **** ****
Balance at beginning of period 9,821 $ 146,598 $ 138,197 $ (42,879 ) $ 251,737
Surrendered shares (24 ) (391 ) — — (415 )
Options exercised 4 59 — — 63
Dividends declared, 0.11 per share — — (1,083 ) — (1,083 )
Stock-based compensation 75 439 — — 514
Shares repurchased (36 ) (598 ) — — (634 )
Net income — — 4,494 — 4,494
Other comprehensive income, net — — — 1,253 1,253
Balance at end of period 9,840 $ 146,107 $ 141,608 $ (41,626 ) $ 255,929

All values are in US Dollars.

**** **** **** Accumulated ****
**** **** **** Other Total
**** Retained Comprehensive Stockholders’
Surplus Earnings (Loss) Income Equity
Six months ended: **** **** **** **** ****
June 30, 2024 **** **** **** **** ****
Balance at beginning of period 9,748 $ 145,456 $ 116,711 $ (45,147 ) $ 226,768
Surrendered shares (94 ) (1,378 ) — — (1,472 )
Options exercised 96 1,263 — — 1,359
Dividends declared, 0.20 per share — — (1,965 ) — (1,965 )
Stock-based compensation 96 827 — — 923
Shares repurchased (17 ) (250 ) — — (267 )
Net income — — 8,764 — 8,764
Other comprehensive loss, net — — — (3,914 ) (3,914 )
Balance at end of period 9,829 $ 145,918 $ 123,510 $ (49,061 ) $ 230,196
June 30, 2025 **** **** **** **** ****
Balance at beginning of period 9,828 $ 146,890 $ 132,935 $ (48,357 ) $ 241,296
Surrendered shares (56 ) (931 ) — — (987 )
Options exercised 34 501 — — 535
Dividends declared, 0.215 per share — — (2,114 ) — (2,114 )
Stock-based compensation 105 859 — — 964
Shares repurchased (71 ) (1,212 ) — — (1,283 )
Net income — — 10,787 — 10,787
Other comprehensive income, net — — — 6,731 6,731
Balance at end of period 9,840 $ 146,107 $ 141,608 $ (41,626 ) $ 255,929

All values are in US Dollars.

See accompanying notes to the consolidated financial statements.

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INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

Six months ended June 30,
2025 2024
Net income $ 10,787 $ 8,764
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,431 1,599
Provision for credit losses (3,455 ) (1,834 )
Net amortization (accretion) of purchase accounting adjustments 26 (40 )
Provision for other real estate owned 296 233
Net (accretion) amortization of securities (200 ) 26
Loss on call or sale of investment securities, net — 383
Loss (gain) on sale or disposition of fixed assets, net 3 (427 )
Gain on sale of other real estate owned, net (29 ) (712 )
Gain on early extinguishment of subordinated debt — (502 )
FHLB stock dividend (146 ) (89 )
Stock-based compensation 964 923
Deferred taxes (28 ) 375
Net change in value of bank owned life insurance (924 ) (851 )
Amortization of subordinated debt issuance costs 21 44
Change in the fair value of equity securities 23 (80 )
Net change in:
Accrued interest receivable 395 180
Other assets (585 ) (999 )
Accrued taxes and other liabilities (923 ) 3,669
Net cash provided by operating activities 7,656 10,662
Cash flows from investing activities: **** ****
Proceeds from sales of investment securities available for sale — 7,906
Purchases of securities available for sale (39,610 ) (6,601 )
Purchases of securities held to maturity — (1,500 )
Proceeds from maturities, prepayments and calls of investment securities available for sale 23,777 18,620
Proceeds from maturities, prepayments and calls of investment securities held to maturity 1,156 3,510
Proceeds from redemption or sale of nonmarketable equity securities 2,315 1,683
Purchases of nonmarketable equity securities (748 ) (2,078 )
Purchases of equity securities at fair value — (1,000 )
Net decrease in loans 21,147 43,582
Proceeds from sales of other real estate owned 272 1,775
Proceeds from sales of fixed assets — 1,340
Purchases of fixed assets (431 ) (279 )
Proceeds from surrender of bank owned life insurance — 8,440
Purchases of bank owned life insurance — (10,000 )
Purchases of other investments (80 ) (65 )
Distributions from investments 117 91
Net cash provided by investing activities 7,915 65,424

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INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Amounts in thousands)
(Unaudited)
Cash flows from financing activities: **** ****
--- --- --- --- --- --- ---
Net decrease in customer deposits (7,752 ) (45,469 )
Net increase (decrease) in repurchase agreements 2,647 (1,201 )
Net increase in short-term FHLB advances 2,785 —
Net increase in borrowings under the Bank Term Funding Program — 16,500
Cash dividends paid on common stock (2,063 ) (1,957 )
Proceeds from stock options exercised 63 1,359
Payments to repurchase common stock (1,283 ) (267 )
Advanced proceeds from preferred stock offering 17,334 —
Extinguishment of subordinated debt — (7,388 )
Net cash provided by (used in) financing activities 11,731 (38,423 )
Net change in cash and cash equivalents 27,302 37,663
Cash and cash equivalents, beginning of period 27,922 32,009
Cash and cash equivalents, end of period $ 55,224 $ 69,672
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES
Transfer from loans to other real estate owned $ 951 $ 230

See accompanying notes to the consolidated financial statements.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company is a financial holding company, headquartered in Baton Rouge, Louisiana that provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, National Association, a national bank, primarily to meet the needs of individuals, professionals and small to medium-sized businesses. The Company’s primary markets are in south Louisiana, southeast Texas and Alabama. At  June 30, 2025 , the Company operated 20 full service branches located in Louisiana, three full service branches located in Texas and six full service branches located in Alabama and had 337 full-time equivalent employees.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with 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 and six month periods ended June 30, 2025 are not necessarily indicative of the results that may be expected for the entire fiscal year. These statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2024, including the notes thereto, which were included as part of the Company’s Annual Report.

Prior period consolidated financial statements are reclassified whenever necessary to conform to the current period presentation. No reclassifications of prior period balances were material to the consolidated financial statements.

Principles of Consolidation

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.

Segment Reporting

The Company determined that all of its banking operations serve a similar customer base, offer similar products and services, and are managed through similar processes. Therefore, the Company’s banking operations are aggregated into one reportable operating segment, which generates income principally from interest on loans and, to a lesser extent, securities investments, as well as from fees charged in connection with various loan and deposit services. The CODM is the Chief Executive Officer, who for the purposes of assessing performance, making operating decisions, and allocating Company resources, regularly reviews net income as reported in the accompanying consolidated statements of income. The level of disaggregation and amounts of significant segment income and expenses that are regularly provided to the CODM are the same as those presented in the accompanying consolidated statements of income. Likewise, the measure of segment assets is reported on the accompanying consolidated balance sheets as total assets.

Use of Estimates

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

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

Other estimates that are susceptible to significant change in the near term relate to the allowance for off-balance sheet credit losses, the fair value of stock-based compensation awards, the determination of other-than-temporary impairments of securities, and the fair value of financial instruments and goodwill. A changing interest rate environment, elevated levels of inflation and changing U.S. trade and tariff policies have made certain estimates more challenging, including those discussed above.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounting Standards Adopted in 2025

FASB ASC Topic 740 “Income Taxes - Improvements to Income Tax Disclosures” Update No. 2023-09 (“ASU 2023-09”). In  December 2023,the FASB issued ASU 2023-09, which enhances the transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires disclosure of additional categories of information about federal, state and foreign income taxes in the rate reconciliation table and requires companies to provide more information about the reconciling items in some categories if a quantitative threshold is met. ASU 2023-09 became effective for the Company on  January 1, 2025. The Company will provide the required disclosures in its Annual Report on Form 10-K for the year ended December 31, 2025, and the adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

FASB “Disclosure Improvements” Update No. 2023-06 (“ASU 2023-06”). In  October 2023,the FASB issued ASU 2023-06, which amends the disclosure or presentation requirements related to various topics. The amendment is intended to align GAAP with the SEC’s regulations. ASU 2023-06 is required to be applied prospectively, and early adoption is prohibited. For reporting entities subject to the SEC’s existing disclosure requirements, the effective dates of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. If by  June 30, 2027,the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed and will not become effective for any entities. ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASC Topic 220 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses” Update No. 2024-03 (“ASU 2024-03”). In  November 2024,the FASB issued ASU 2024-03, which requires disaggregated disclosure of income statement expenses in a tabular format in the notes of the financial statements for public business entities. ASU 2024-03 is effective on a prospective basis for fiscal years beginning after  December 15, 2026and interim periods within fiscal years beginning after  *December 15, 2027,*with early adoption and retrospective application permitted. The Company is currently evaluating the provisions of the amendment and the impact on its future consolidated financial statements.

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 and six months ended June 30, 2025 and 2024 (in thousands, except share data).

Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Earnings per common share – basic
Net income allocated to common shareholders $ 4,494 $ 4,057 $ 10,787 $ 8,764
Weighted average basic shares outstanding 9,844,351 9,827,903 9,838,521 9,798,764
Basic earnings per common share $ 0.46 $ 0.41 $ 1.10 $ 0.89
Earnings per common share – diluted
Net income allocated to common shareholders $ 4,494 $ 4,057 $ 10,787 $ 8,764
Weighted average basic shares outstanding 9,844,351 9,827,903 9,838,521 9,798,764
Dilutive effect of securities 114,043 74,267 100,101 58,408
Total weighted average diluted shares outstanding 9,958,394 9,902,170 9,938,622 9,857,172
Diluted earnings per common share $ 0.46 $ 0.41 $ 1.09 $ 0.89

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

Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Stock options 4,206 3,722 4,167 3,171
RSUs 265 16,479 446 4,103

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3. INVESTMENT SECURITIES

Debt Securities

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

Gross Gross
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
June 30, 2025 ****
Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 17,361 $ 43 $ (231 ) $ 17,173
Obligations of state and political subdivisions 17,726 — (1,976 ) 15,750
Corporate bonds 26,910 24 (1,928 ) 25,006
Residential mortgage-backed securities 274,593 261 (41,550 ) 233,304
Commercial mortgage-backed securities 72,009 210 (7,744 ) 64,475
Total $ 408,599 $ 538 $ (53,429 ) $ 355,708
Gross Gross
--- --- --- --- --- --- --- --- --- ---
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
December 31, 2024 ****
Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 15,985 $ 47 $ (325 ) $ 15,707
Obligations of state and political subdivisions 18,363 — (2,243 ) 16,120
Corporate bonds 29,772 8 (2,513 ) 27,267
Residential mortgage-backed securities 256,272 39 (47,543 ) 208,768
Commercial mortgage-backed securities 72,172 133 (9,046 ) 63,259
Total $ 392,564 $ 227 $ (61,670 ) $ 331,121

The Company calculates realized gains and losses on sales of debt securities under the specific identification method. Proceeds from sales of investment securities classified as AFS and gross gains and losses are summarized below for the periods presented (dollars in thousands).

Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Proceeds from sales $ — $ 7,906 $ — $ 7,906
Gross gains $ — $ — $ — $ —
Gross losses $ — $ (383 ) $ — $ (383 )

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

Gross Gross
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
June 30, 2025 ****
Obligations of state and political subdivisions $ 39,584 $ 2,442 $ (80 ) $ 41,946
Residential mortgage-backed securities 1,944 — (200 ) 1,744
Total $ 41,528 $ 2,442 $ (280 ) $ 43,690
Gross Gross
--- --- --- --- --- --- --- --- --- ---
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
December 31, 2024 ****
Obligations of state and political subdivisions $ 40,618 $ 70 $ (365 ) $ 40,323
Residential mortgage-backed securities 2,069 — (248 ) 1,821
Total $ 42,687 $ 70 $ (613 ) $ 42,144

Securities are classified in the consolidated balance sheets according to management’s intent. The Company had no securities classified as trading as of June 30, 2025 or December 31, 2024.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The approximate fair value of AFS securities and unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized below as of the dates presented (dollars in thousands).

Less than 12 Months 12 Months or More Total
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
June 30, 2025 **** **** ****
Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 3,418 $ (14 ) $ 3,310 $ (217 ) $ 6,728 $ (231 )
Obligations of state and political subdivisions 3,710 (125 ) 12,040 (1,851 ) 15,750 (1,976 )
Corporate bonds 2,736 (29 ) 19,793 (1,899 ) 22,529 (1,928 )
Residential mortgage-backed securities 8,892 (89 ) 195,201 (41,461 ) 204,093 (41,550 )
Commercial mortgage-backed securities 8,712 (118 ) 40,627 (7,626 ) 49,339 (7,744 )
Total $ 27,468 $ (375 ) $ 270,971 $ (53,054 ) $ 298,439 $ (53,429 )
Less than 12 Months 12 Months or More Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
December 31, 2024 **** **** ****
Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 5,505 $ (20 ) $ 4,012 $ (305 ) $ 9,517 $ (325 )
Obligations of state and political subdivisions 3,434 (99 ) 12,686 (2,144 ) 16,120 (2,243 )
Corporate bonds 1,947 (5 ) 24,326 (2,508 ) 26,273 (2,513 )
Residential mortgage-backed securities 5,432 (103 ) 198,803 (47,440 ) 204,235 (47,543 )
Commercial mortgage-backed securities 9,226 (134 ) 42,293 (8,912 ) 51,519 (9,046 )
Total $ 25,544 $ (361 ) $ 282,120 $ (61,309 ) $ 307,664 $ (61,670 )

At  June 30, 2025, 679 of the Company’s AFS debt securities had unrealized losses totaling 15.2% of the individual securities’ amortized cost basis and 13.1% of the Company’s total amortized cost basis of the AFS investment securities portfolio. At such date, 612 of the 679 securities had been in a continuous loss position for over 12 months.

The approximate fair value of HTM securities and unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized below as of the dates presented (dollars in thousands).

Less than 12 Months 12 Months or More Total
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
June 30, 2025 **** ****
Obligations of state and political subdivisions $ — $ — $ 2,261 $ (80 ) $ 2,261 $ (80 )
Residential mortgage-backed securities — — 1,744 (200 ) 1,744 (200 )
Total $ — $ — $ 4,005 $ (280 ) $ 4,005 $ (280 )
Less than 12 Months 12 Months or More Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
December 31, 2024 **** **** ****
Obligations of state and political subdivisions $ 10,795 $ (209 ) $ 2,458 $ (156 ) $ 13,253 $ (365 )
Residential mortgage-backed securities — — 1,821 (248 ) 1,821 (248 )
Total $ 10,795 $ (209 ) $ 4,279 $ (404 ) $ 15,074 $ (613 )

Unrealized losses are generally due to changes in market interest rates. The Company has the intent to hold these securities either until maturity or a forecasted recovery, and it is more likely than not that the Company will not have to sell the securities before the recovery of their amortized cost basis. Due to the nature of the investments, current market prices, and the current interest rate environment, the Company determined that these declines were not attributable to credit losses at June 30, 2025 or December 31, 2024.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The amortized cost and approximate fair value of investment debt securities, by contractual maturity, are shown below as of June 30, 2025 (dollars in thousands). Actual maturities  maydiffer from contractual maturities due to mortgage-backed securities whereby borrowers  mayhave the right to call or prepay obligations with or without call or prepayment penalties and certain callable bonds whereby the issuer has the option to call the bonds prior to contractual maturity.

Available for Sale Held to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
June 30, 2025
Due within one year $ 2,158 $ 2,154 $ — $ —
Due after one year through five years 29,565 29,113 2,341 2,261
Due after five years through ten years 30,126 28,005 2,740 2,807
Due after ten years 346,750 296,436 36,447 38,622
Total debt securities $ 408,599 $ 355,708 $ 41,528 $ 43,690

Accrued interest receivable on the Company’s investment securities was $2.1 million and $1.9 million at June 30, 2025 and  December 31, 2024, respectively, and is included in “Accrued interest receivable” on the accompanying consolidated balance sheets.

At June 30, 2025, securities with a carrying value of $40.8 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $68.1 million in pledged securities at December 31, 2024.

Equity Securities

Equity securities at fair value include marketable securities in corporate stocks and mutual funds and totaled $2.6 million at  June 30, 2025 and  December 31, 2024.

Nonmarketable equity securities primarily consist of FHLB stock and FRB stock. Members of the FHLB and FRB are required to own a certain amount of stock based on the level of borrowings and other factors and  mayinvest in additional amounts. FHLB stock and FRB stock are carried at cost, restricted as to redemption, and periodically evaluated for impairment based on the ultimate recovery of par value. Both cash and stock dividends are reported as income. Nonmarketable equity securities also include investments in other correspondent banks including Independent Bankers Financial Corporation and First National Bankers Bank stock. These investments are carried at cost which approximates fair value. The balance of nonmarketable equity securities at  June 30, 2025 and  December 31, 2024 was $15.1 million and $16.5 million, respectively.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

June 30, 2025 December 31, 2024
Construction and development $ 141,654 $ 154,553
1-4 Family 387,796 396,815
Multifamily 102,569 84,576
Farmland 4,519 6,977
Commercial real estate 928,191 944,548
Total mortgage loans on real estate 1,564,729 1,587,469
Commercial and industrial 531,460 526,928
Consumer 10,166 10,687
Total loans $ 2,106,355 $ 2,125,084

Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. Loan origination fees, net of direct loan origination costs and commitment fees, are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable. Unamortized premiums and discounts on loans, included in the total loans balances above, were $0.1 million at both June 30, 2025 and  December 31, 2024, and unearned income, or deferred fees, on loans was $1.1 million and $1.0 million at  June 30, 2025 and  December 31, 2024, respectively, and is also included in the total loans balance in the table above.

The tables below provide an analysis of the aging of loans as of  June 30, 2025 and  December 31, 2024 (dollars in thousands).

June 30, 2025
Current 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total > 90 Days and Accruing
Construction and development $ 141,629 $ 2 $ 17 $ 6 $ 141,654 $ —
1-4 Family 382,780 893 787 3,336 387,796 —
Multifamily 101,919 — 650 — 102,569 —
Farmland 4,519 — — — 4,519 —
Commercial real estate 925,307 983 1,901 — 928,191 —
Total mortgage loans on real estate 1,556,154 1,878 3,355 3,342 1,564,729 —
Commercial and industrial 531,320 69 43 28 531,460 26
Consumer 10,061 31 10 64 10,166 —
Total loans $ 2,097,535 $ 1,978 $ 3,408 $ 3,434 $ 2,106,355 $ 26
December 31, 2024
--- --- --- --- --- --- --- --- --- --- --- --- ---
Current 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total > 90 Days and Accruing
Construction and development $ 154,461 $ 86 $ — $ 6 $ 154,553 $ —
1-4 Family 387,782 5,200 1,054 2,779 396,815 —
Multifamily 84,576 — — — 84,576 —
Farmland 6,977 — — — 6,977 —
Commercial real estate 942,493 458 48 1,549 944,548 —
Total mortgage loans on real estate 1,576,289 5,744 1,102 4,334 1,587,469 —
Commercial and industrial 526,329 64 270 265 526,928 —
Consumer 10,377 87 65 158 10,687 2
Total loans $ 2,112,995 $ 5,895 $ 1,437 $ 4,757 $ 2,125,084 $ 2

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The tables below provide an analysis of nonaccrual loans as of  June 30, 2025 and  December 31, 2024 (dollars in thousands).

June 30, 2025
Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Loss Total Nonaccrual Loans
Construction and development $ 23 $ — $ 23
1-4 Family 989 2,967 3,956
Multifamily — — —
Farmland — — —
Commercial real estate 1,575 1,748 3,323
Total mortgage loans on real estate 2,587 4,715 7,302
Commercial and industrial 83 — 83
Consumer 53 15 68
Total loans $ 2,723 $ 4,730 $ 7,453
December 31, 2024
--- --- --- --- --- --- ---
Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Loss Total Nonaccrual Loans
Construction and development $ 24 $ — $ 24
1-4 Family 1,475 2,336 3,811
Multifamily — — —
Farmland — — —
Commercial real estate 4,168 123 4,291
Total mortgage loans on real estate 5,667 2,459 8,126
Commercial and industrial 252 230 482
Consumer 211 5 216
Total loans $ 6,130 $ 2,694 $ 8,824

Nonaccrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, the borrower’s debt service capacity is considered through the analysis of current financial information, if available, and/or current information with regard to the collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and payment of future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower. No material interest income was recognized in the consolidated statements of income on nonaccrual loans for the six months ended June 30, 2025 and 2024.

Collateral Dependent Loans

Collateral dependent loans are loans for which the repayments, on the basis of the Company’s assessment at the reporting date, are expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Loans that do not share risk characteristics are excluded from the loan pools and evaluated on an individual basis, and the Company has determined to evaluate collateral dependent loans individually for impairment. The ACL for collateral dependent loans is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The Company’s collateral dependent loans include all nonaccrual loans shown in the tables above at  June 30, 2025 and  December 31, 2024. The types of collateral that secure collateral dependent loans are discussed under “Portfolio Segment Risk Factors” below.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Portfolio Segment Risk Factors

The following describes the risk characteristics relevant to each of the Company’s loan portfolio segments.

Construction and Development - Construction and development loans are generally made for the purpose of acquisition and development of land to be improved through the construction of commercial and residential buildings. The successful repayment of these types of loans is generally dependent upon a commitment for permanent financing from the Company, or from the sale of the constructed property. These loans carry more risk than commercial or residential real estate loans due to the dynamics of construction projects, changes in interest rates, the long-term financing market, and state and local government regulations. One such risk is that loan funds are advanced upon the security of the property under construction, which is of uncertain value prior to the completion of construction. Thus, it is more difficult to evaluate accurately the total loan funds required to complete a project and to calculate related loan-to-value ratios. The Company attempts to minimize the risks associated with construction lending by limiting loan-to-value ratios as described above. In addition, as to speculative development loans, the Company generally makes such loans only to borrowers that have a positive pre-existing relationship with us. The Company manages risk by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations in any one business or industry. Construction and development loans are primarily secured by residential and commercial properties, which are under construction and/or redevelopment.

1-4 Family - The 1-4 family portfolio mainly consists of residential mortgage loans to consumers to finance a primary residence. The majority of these loans are secured by first liens on residential properties located in the Company’s market areas and carry risks associated with the creditworthiness of the borrower and changes in the value of the collateral and loan-to-value-ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, employing experienced underwriting personnel, requiring standards for appraisers, and not making subprime loans. In the third quarter of 2023, the Company exited the consumer mortgage origination business.

Multifamily - Multifamily loans are normally made to real estate investors to support permanent financing for multifamily residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk, as compared to other commercial lending. In addition, underwriting requirements for multifamily properties are stricter than for other nonowner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer. Multifamily loans are primarily secured by first liens on multifamily real estate.

Farmland - Farmland loans are often for land improvements related to agricultural endeavors and may include construction of new specialized facilities. These loans are usually repaid through the conversion to permanent financing, or if scheduled loan amortization begins, for the long-term benefit of the borrower’s ongoing operations. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Company policies. Farmland loans are primarily secured by raw land.

Commercial Real Estate - Commercial real estate loans are extensions of credit secured by owner occupied and nonowner-occupied collateral. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Company policies. Commercial real estate loans typically depend on the successful operation and management of the businesses that occupy these properties or the financial stability of tenants occupying the properties. Nonowner-occupied commercial real estate loans typically are dependent, in large part, on the owner’s ability to rent the property and the ability of the tenants to pay rent, whereas owner-occupied commercial real estate loans typically are dependent, in large part, on the success of the owner’s business. General market conditions and economic activity may impact the performance of these types of loans, including fluctuations in the value of real estate, new job creation trends, and tenant vacancy rates. The Company attempts to limit risk by analyzing a borrower’s cash flow and collateral value on an ongoing basis. The Company also typically requires personal guarantees from the principal owners of the property, supported by a review of their personal financial statements, as an additional means of mitigating risk. The Company manages risk by avoiding concentrations in any one business or industry. Commercial real estate loans are primarily secured by retail shopping facilities, office and industrial buildings, healthcare facilities, warehouses, and various special purpose commercial properties.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Commercial and Industrial - Commercial and industrial loans receive similar underwriting treatment as commercial real estate loans in that the repayment source is analyzed to determine its ability to meet cash flow coverage requirements as set forth by Company policies. Repayment of these loans generally comes from the generation of cash flow as the result of the borrower’s business operations. Commercial lending generally involves different risks from those associated with commercial real estate lending or construction lending. Although commercial loans  maybe collateralized by equipment or other business assets (including real estate, if available as collateral), the repayment of these types of loans depends primarily on the creditworthiness and projected cash flow of the borrower (and any guarantors). Thus, the general business conditions of the local economy and the borrower’s ability to sell its products and services, thereby generating sufficient operating revenue to repay us under the agreed upon terms and conditions, are the chief considerations when assessing the risk of a commercial loan. The liquidation of collateral, if any, is considered a secondary source of repayment because equipment and other business assets  *may,*among other things, be obsolete or of limited resale value. The Company actively monitors certain financial measures of the borrower, including advance rate, cash flow, collateral value and other appropriate credit factors. Commercial and industrial loans also include public finance loans made to governmental entities, which can be taxable or tax-exempt, and are generally repaid using pledged revenue sources including income tax, property tax, sales tax, and utility revenue, among other sources. Commercial and industrial loans are primarily secured by accounts receivable, inventory and equipment.

Consumer - Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include auto loans, credit cards, and other consumer installment loans. Typically, the Company evaluates the borrower’s repayment ability through a review of credit scores and an evaluation of debt to income ratios. Repayment of consumer loans depends upon key consumer economic measures and upon the borrower’s financial stability and is more likely to be adversely affected by divorce, job loss, illness and personal hardships than repayment of other loans. A shortfall in the value of any collateral also may pose a risk of loss to the Company for these types of loans. Consumer loans include loans primarily secured by vehicles and unsecured loans.

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 higher credit characteristics and financial strength. The borrowers at least generate profits and cash flow that are in line with peer and industry standards and have debt service coverage ratios above loan covenants and policy guidelines. For some of these loans, a guaranty from a financially capable party mitigates characteristics of the borrower that might otherwise result in a lower grade.

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

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

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

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

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The tables below present the Company’s loan portfolio by year of origination, category, and credit quality indicator as of June 30, 2025 and  December 31, 2024 (dollars in thousands). Loans acquired are shown in the table by origination year. The Company had an immaterial amount of revolving loans converted to term loans at  June 30, 2025 and  December 31, 2024.

June 30, 2025
2025 2024 2023 2022 2021 Prior Revolving Loans Total
Construction and development **** **** **** **** **** **** **** ****
Pass $ 16,036 $ 43,397 $ 32,292 $ 14,775 $ 3,088 $ 2,865 $ 19,107 $ 131,560
Special Mention — — — — — — — —
Substandard — — 4,504 4,842 725 23 — 10,094
Total construction and development $ 16,036 $ 43,397 $ 36,796 $ 19,617 $ 3,813 $ 2,888 $ 19,107 $ 141,654
Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
1-4 Family **** **** **** **** **** **** **** ****
Pass $ 6,449 $ 10,310 $ 35,266 $ 91,640 $ 69,916 $ 112,443 $ 56,074 $ 382,098
Special Mention — — — — — — — —
Substandard — 225 312 1,495 836 2,572 258 5,698
Total 1-4 family $ 6,449 $ 10,535 $ 35,578 $ 93,135 $ 70,752 $ 115,015 $ 56,332 $ 387,796
Current-period gross charge-offs $ — $ — $ — $ — $ — $ (23 ) $ — $ (23 )
Multifamily **** **** **** **** **** **** **** ****
Pass $ 6,864 $ 1,595 $ 22,947 $ 45,828 $ 11,696 $ 7,478 $ 129 $ 96,537
Special Mention — — — — — 3,875 — 3,875
Substandard — — — 650 — 1,507 — 2,157
Total multifamily $ 6,864 $ 1,595 $ 22,947 $ 46,478 $ 11,696 $ 12,860 $ 129 $ 102,569
Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Farmland **** **** **** **** **** **** **** ****
Pass $ 495 $ 70 $ 493 $ 210 $ 362 $ 2,200 $ 689 $ 4,519
Special Mention — — — — — — — —
Substandard — — — — — — — —
Total farmland $ 495 $ 70 $ 493 $ 210 $ 362 $ 2,200 $ 689 $ 4,519
Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate **** **** **** **** **** **** **** ****
Pass $ 61,645 $ 44,111 $ 72,269 $ 279,769 $ 194,224 $ 248,834 $ 8,748 $ 909,600
Special Mention — — — — 1,605 3,948 — 5,553
Substandard — 2,577 359 1,283 4,003 4,816 — 13,038
Total commercial real estate $ 61,645 $ 46,688 $ 72,628 $ 281,052 $ 199,832 $ 257,598 $ 8,748 $ 928,191
Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and industrial **** **** **** **** **** **** **** ****
Pass $ 43,317 $ 20,010 $ 28,222 $ 114,964 $ 20,056 $ 18,315 $ 285,113 $ 529,997
Special Mention — — — — — — 973 973
Substandard — 381 — — — 83 26 490
Total commercial and industrial $ 43,317 $ 20,391 $ 28,222 $ 114,964 $ 20,056 $ 18,398 $ 286,112 $ 531,460
Current-period gross charge-offs $ — $ (28 ) $ (78 ) $ (7 ) $ (24 ) $ — $ (43 ) $ (180 )
Consumer **** **** **** **** **** **** **** ****
Pass $ 2,976 $ 2,792 $ 1,567 $ 988 $ 438 $ 758 $ 553 $ 10,072
Special Mention — — — — — — — —
Substandard 1 — — 6 — 87 — 94
Total consumer $ 2,977 $ 2,792 $ 1,567 $ 994 $ 438 $ 845 $ 553 $ 10,166
Current-period gross charge-offs $ (30 ) $ (1 ) $ (10 ) $ (6 ) $ (7 ) $ (1 ) $ — $ (55 )
Total loans **** **** **** **** **** **** **** ****
Pass $ 137,782 $ 122,285 $ 193,056 $ 548,174 $ 299,780 $ 392,893 $ 370,413 $ 2,064,383
Special Mention — — — — 1,605 7,823 973 10,401
Substandard 1 3,183 5,175 8,276 5,564 9,088 284 31,571
Total loans $ 137,783 $ 125,468 $ 198,231 $ 556,450 $ 306,949 $ 409,804 $ 371,670 $ 2,106,355
Current-period gross charge-offs $ (30 ) $ (29 ) $ (88 ) $ (13 ) $ (31 ) $ (24 ) $ (43 ) $ (258 )

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving Loans Total
Construction and development **** **** **** **** **** **** ****
Pass $ 53,448 $ 36,560 $ 26,585 $ 3,583 $ 2,176 $ 1,754 $ 19,946 $ 144,052
Special Mention — 374 — 737 — — — 1,111
Substandard — 4,524 4,842 — 18 6 — 9,390
Total construction and development $ 53,448 $ 41,458 $ 31,427 $ 4,320 $ 2,194 $ 1,760 $ 19,946 $ 154,553
Current-period gross charge-offs $ — $ — $ (77 ) $ (72 ) $ — $ — $ — $ (149 )
1-4 Family **** **** **** **** **** **** ****
Pass $ 12,039 $ 38,426 $ 92,502 $ 72,848 $ 53,300 $ 70,854 $ 51,424 $ 391,393
Special Mention 61 — — — — 2 — 63
Substandard 170 352 902 931 752 2,079 173 5,359
Total 1-4 family $ 12,270 $ 38,778 $ 93,404 $ 73,779 $ 54,052 $ 72,935 $ 51,597 $ 396,815
Current-period gross charge-offs $ (86 ) $ — $ (42 ) $ — $ — $ (120 ) $ — $ (248 )
Multifamily **** **** **** **** **** **** ****
Pass $ 1,639 $ 7,538 $ 47,070 $ 11,994 $ 3,400 $ 6,796 $ 199 $ 78,636
Special Mention — — — — — 3,940 — 3,940
Substandard — — 649 — 1,351 — — 2,000
Total multifamily $ 1,639 $ 7,538 $ 47,719 $ 11,994 $ 4,751 $ 10,736 $ 199 $ 84,576
Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Farmland **** **** **** **** **** **** ****
Pass $ 72 $ 1,605 $ 1,290 $ 633 $ 892 $ 1,508 $ 977 $ 6,977
Special Mention — — — — — — — —
Substandard — — — — — — — —
Total farmland $ 72 $ 1,605 $ 1,290 $ 633 $ 892 $ 1,508 $ 977 $ 6,977
Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate **** **** **** **** **** **** ****
Pass $ 51,071 $ 77,895 $ 293,519 $ 202,461 $ 159,968 $ 134,164 $ 7,993 $ 927,071
Special Mention — 251 — 1,662 162 157 — 2,232
Substandard 3,178 648 1,321 3,986 2,901 3,094 117 15,245
Total commercial real estate $ 54,249 $ 78,794 $ 294,840 $ 208,109 $ 163,031 $ 137,415 $ 8,110 $ 944,548
Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and industrial **** **** **** **** **** **** ****
Pass $ 45,894 $ 38,599 $ 120,877 $ 24,351 $ 7,612 $ 15,842 $ 272,853 $ 526,028
Special Mention — — — — — — 418 418
Substandard 23 — 6 24 — 235 194 482
Total commercial and industrial $ 45,917 $ 38,599 $ 120,883 $ 24,375 $ 7,612 $ 16,077 $ 273,465 $ 526,928
Current-period gross charge-offs $ — $ — $ (18 ) $ — $ — $ — $ (812 ) $ (830 )
Consumer **** **** **** **** **** **** ****
Pass $ 4,043 $ 2,602 $ 1,307 $ 824 $ 200 $ 821 $ 645 $ 10,442
Special Mention — — — — — — — —
Substandard — 144 6 — 12 83 — 245
Total consumer $ 4,043 $ 2,746 $ 1,313 $ 824 $ 212 $ 904 $ 645 $ 10,687
Current-period gross charge-offs $ (87 ) $ (6 ) $ (7 ) $ (2 ) $ — $ (25 ) $ (8 ) $ (135 )
Total loans **** **** **** **** **** **** ****
Pass $ 168,206 $ 203,225 $ 583,150 $ 316,694 $ 227,548 $ 231,739 $ 354,037 $ 2,084,599
Special Mention 61 625 — 2,399 162 4,099 418 7,764
Substandard 3,371 5,668 7,726 4,941 5,034 5,497 484 32,721
Total loans $ 171,638 $ 209,518 $ 590,876 $ 324,034 $ 232,744 $ 241,335 $ 354,939 $ 2,125,084
Current-period gross charge-offs $ (173 ) $ (6 ) $ (144 ) $ (74 ) $ — $ (145 ) $ (820 ) $ (1,362 )

The Company had no loans that were classified as doubtful or loss at  June 30, 2025 or  December 31, 2024.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loan Participations and Sold Loans

Loan participations and whole loans sold to and serviced for others are not included in the accompanying consolidated balance sheets, the balances of which were $41.0 million and $38.2 million at June 30, 2025 and  December 31, 2024, respectively. The unpaid principal balances of these loans were approximately $220.2 million and $175.0 million at June 30, 2025 and  December 31, 2024, respectively.

Loans to Related Parties

In the ordinary course of business, the Company makes loans to related parties including its executive officers, principal stockholders, directors and their immediate family members, as well as to companies of which these individuals are principal owners. Loans outstanding to such related party borrowers amounted to approximately $35.6 million and $43.6 million as of June 30, 2025 and  December 31, 2024, respectively. No related party loans were classified as nonperforming or nonaccrual at  June 30, 2025 or  December 31, 2024.

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

June 30, 2025 December 31, 2024
Balance, beginning of period $ 43,647 $ 46,000
New loans/changes in relationship 170 620
Repayments/changes in relationship (8,168 ) (2,973 )
Balance, end of period $ 35,649 $ 43,647

Allowance for Credit Losses

The Company accounts for the ACL in accordance with FASB ASC Topic 326 “Financial Instruments – Credit Losses” (“ASC 326”), which uses the CECL accounting methodology. The CECL methodology requires that lifetime expected credit losses be recorded at the time the financial asset is originated or acquired, and be adjusted each period as a provision for credit losses for changes in expected lifetime credit losses. The Company developed a CECL model methodology that calculates expected credit losses over the life of the portfolio by analyzing the composition, characteristics and quality of the loan portfolio, as well as prevailing economic conditions and forecasts. The CECL calculation estimates credit losses using a combination of discounted cash flow and remaining life analyses. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, when necessary, the model reverts back to the historical loss rates adjusted for qualitative factors related to current conditions using a four-quarter reversion period. The Company evaluates the adequacy of the ACL on a quarterly basis.

The ACL is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist. For each pool of loans, the Company evaluates and applies qualitative adjustments to the calculated ACL based on several factors, including, but not limited to, changes in current and expected future economic conditions, changes in the nature and volume of the portfolio, changes in levels of concentrations, changes in the volume and severity of past due loans, changes in lending policies and personnel and changes in the competitive and regulatory environment of the banking industry. Loans that do not share similar risk characteristics with other loans are excluded from the loan pools and individually evaluated for impairment. For collateral dependent loans where the borrower is experiencing financial difficulty, which the Company evaluates independently from the loan pool, the expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, which is based on third party appraisals. Individually evaluated loans that are not collateral dependent are evaluated based on a discounted cash flow methodology. Credits deemed uncollectible are charged to the ACL. Provisions for credit losses and recoveries on loans previously charged off are adjustments to the ACL.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company made the accounting policy election to exclude accrued interest receivable from the amortized cost of loans and the estimate of the ACL. Accrued interest receivable on the Company’s loans was $11.9 million and $12.5 million at  June 30, 2025 and  December 31, 2024, respectively, and is included in “Accrued interest receivable” on the accompanying consolidated balance sheets.

The table below shows a summary of the activity in the ACL for the

three and six months ended June 30, 2025 and 2024 (dollars in thousands).

Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Balance, beginning of period $ 26,435 $ 29,114 $ 26,721 $ 30,540
Provision for credit losses on loans^(1)^ 172 (298 ) (3,523 ) (1,709 )
Charge-offs (131 ) (274 ) (258 ) (377 )
Recoveries 144 78 3,680 166
Balance, end of period $ 26,620 $ 28,620 $ 26,620 $ 28,620
^(1)^ For the three months ended  June 30, 2025, the $0.1 million provision for credit losses on the consolidated statement of income includes a $0.2 million provision for loan losses and a $31,000 negative provision for unfunded loan commitments. For the six months ended June 30, 2025, the $3.5 million negative provision for credit losses on the consolidated statement of income includes a $3.5 million negative provision for loan losses and a $68,000 provision for unfunded loan commitments. For the three months ended June 30, 2024, the $0.4 million negative provision for credit losses on the consolidated statement of income includes a $0.3 million negative provision for loan losses and a $0.1 million negative provision for unfunded loan commitments. For the six months ended June 30, 2024, the $1.8 million negative provision for credit losses on the consolidated statement of income includes a $1.7 million negative provision for loan losses and a $0.1 million negative provision for unfunded loan commitments.
--- ---

The provision for credit losses for the three months ended  June 30, 2025 was primarily due to changes in the economic forecast and loan mix. The negative provision for credit losses for the six months ended June 30, 2025 was primarily due to a $3.3 million recovery during the first quarter of 2025 of loans previously charged off as a result of a property insurance settlement related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. The negative provision for credit losses for the three months ended  June 30, 2024 was primarily due to a decrease in total loans and aging of existing loans. The negative provision for credit losses for the six months ended June 30, 2024 was primarily due to a decrease in total loans, aging of existing loans, and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables outline the activity in the ACL by collateral type for the

three and six months ended June 30, 2025 and 2024, and show both the allowance and portfolio balances for loans individually and collectively evaluated for impairment as of  June 30, 2025 and 2024 (dollars in thousands).

Three months ended June 30, 2025
Construction & Development 1-4 Family Multifamily Farmland Commercial Real Estate Commercial & Industrial Consumer Total
Allowance for credit losses: **** **** **** **** **** **** ****
Beginning balance $ 1,258 $ 6,552 $ 1,497 $ 8 $ 12,018 $ 5,002 $ 100 $ 26,435
Provision for credit losses on loans 55 (198 ) (3 ) (4 ) (14 ) 325 11 172
Charge-offs — — — — — (102 ) (29 ) (131 )
Recoveries — 80 — 1 8 38 17 144
Ending balance $ 1,313 $ 6,434 $ 1,494 $ 5 $ 12,012 $ 5,263 $ 99 $ 26,620
Three months ended June 30, 2024
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Construction & Development 1-4 Family Multifamily Farmland Commercial Real Estate Commercial & Industrial Consumer Total
Allowance for credit losses: **** **** **** **** **** **** ****
Beginning balance $ 1,574 $ 5,928 $ 1,535 $ 9 $ 12,271 $ 7,676 $ 121 $ 29,114
Provision for credit losses on loans 58 (84 ) (17 ) — (41 ) (205 ) (9 ) (298 )
Charge-offs (149 ) (106 ) — — — — (19 ) (274 )
Recoveries 9 3 — — — 58 8 78
Ending balance $ 1,492 $ 5,741 $ 1,518 $ 9 $ 12,230 $ 7,529 $ 101 $ 28,620
Six months ended June 30, 2025
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Construction & Development 1-4 Family Multifamily Farmland Commercial Real Estate Commercial & Industrial Consumer Total
Allowance for credit losses: **** **** **** **** **** ****
Beginning balance $ 1,145 $ 5,603 $ 1,185 $ 8 $ 11,759 $ 6,933 $ 88 $ 26,721
Provision for credit losses on loans 167 766 309 (4 ) (3,069 ) (1,737 ) 45 (3,523 )
Charge-offs — (23 ) — — — (180 ) (55 ) (258 )
Recoveries 1 88 — 1 3,322 247 21 3,680
Ending balance $ 1,313 $ 6,434 $ 1,494 $ 5 $ 12,012 $ 5,263 $ 99 $ 26,620
Ending allowance balance for loans individually evaluated for impairment — 255 — — 150 — 3 408
Ending allowance balance for loans collectively evaluated for impairment 1,313 6,179 1,494 5 11,862 5,263 96 26,212
Loans receivable: **** **** **** **** **** ****
Balance of loans individually evaluated for impairment 23 3,956 — — 3,323 83 68 7,453
Balance of loans collectively evaluated for impairment 141,631 383,840 102,569 4,519 924,868 531,377 10,098 2,098,902
Total period-end balance $ 141,654 $ 387,796 $ 102,569 $ 4,519 $ 928,191 $ 531,460 $ 10,166 $ 2,106,355
Six months ended June 30, 2024
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Construction & Development 1-4 Family Multifamily Farmland Commercial Real Estate Commercial & Industrial Consumer Total
Allowance for credit losses: **** **** **** **** **** ****
Beginning balance $ 2,471 $ 9,129 $ 1,124 $ 2 $ 10,691 $ 6,920 $ 203 $ 30,540
Provision for credit losses on loans (848 ) (3,290 ) 394 (29 ) 1,539 586 (61 ) (1,709 )
Charge-offs (149 ) (106 ) — — — (66 ) (56 ) (377 )
Recoveries 18 8 — 36 — 89 15 166
Ending balance $ 1,492 $ 5,741 $ 1,518 $ 9 $ 12,230 $ 7,529 $ 101 $ 28,620
Ending allowance balance for loans individually evaluated for impairment 14 116 — — — 195 8 333
Ending allowance balance for loans collectively evaluated for impairment 1,478 5,625 1,518 9 12,230 7,334 93 28,287
Loans receivable: **** **** **** **** **** ****
Balance of loans individually evaluated for impairment 26 3,789 — — 546 444 107 4,912
Balance of loans collectively evaluated for impairment 177,814 410,967 104,269 7,542 942,894 507,378 10,983 2,161,847
Total period-end balance $ 177,840 $ 414,756 $ 104,269 $ 7,542 $ 943,440 $ 507,822 $ 11,090 $ 2,166,759

Loan Modifications to Borrowers Exper iencing Financial Difficulty

Occasionally, the Company modifies loans to borrowers in financial distress by providing certain concessions, such as principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination of such concessions. Modifications that do not impact the contractual payments terms, such as covenant waivers, modification of a contingent acceleration clauses, and insignificant payment delays are not included in the disclosures. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. During the six months ended June 30, 2025 and 2024, the Company did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5. STOCKHOLDERS’ EQUITY

Accumulated Other Comprehensive (Loss) Income

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

Three months ended June 30,
2025 2024
Beginning of Period Net Change End of Period Beginning of Period Net Change End of Period
Unrealized (loss) gain, AFS, net $ (37,954 ) $ 1,253 $ (36,701 ) $ (43,437 ) $ (407 ) $ (43,844 )
Reclassification of realized (gain) loss, AFS, net (4,926 ) — (4,926 ) (5,521 ) 303 (5,218 )
Unrealized gain, transfer from AFS to HTM, net 1 — 1 1 — 1
Accumulated other comprehensive (loss) income $ (42,879 ) $ 1,253 $ (41,626 ) $ (48,957 ) $ (104 ) $ (49,061 )
Six months ended June 30,
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
2025 2024
Beginning of Period Net Change End of Period Beginning of Period Net Change End of Period
Unrealized (loss) gain, AFS, net $ (43,432 ) $ 6,731 $ (36,701 ) $ (39,627 ) $ (4,217 ) $ (43,844 )
Reclassification of realized (gain) loss, AFS, net (4,926 ) — (4,926 ) (5,521 ) 303 (5,218 )
Unrealized gain, transfer from AFS to HTM, net 1 — 1 1 — 1
Accumulated other comprehensive (loss) income $ (48,357 ) $ 6,731 $ (41,626 ) $ (45,147 ) $ (3,914 ) $ (49,061 )

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6. STOCK-BASED COMPENSATION

Equity Incentive Plan. The Company’s Amended and Restated 2017 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity awards, such as restricted stock, RSUs, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees, non-employee directors, and consultants. Under the Plan, a total of 1,200,000 shares of common stock are reserved, 600,000 of which were authorized in 2021, for issuance to eligible participants pursuant to equity awards under the Plan. The Plan is administered by the Compensation Committee of the Board, which determines, within the provisions of the Plan, those eligible employees to whom, and the times at which, equity awards will be granted. The Compensation Committee, in its discretion,  maydelegate its authority and duties under the Plan to specified officers; however, only the Compensation Committee  mayapprove the terms of equity awards to the Company’s executive officers and directors. At  June 30, 2025, approximately 205,635 shares remain available for grant under the plan.

Stock Options

The Company uses a Black-Scholes option pricing model to estimate the fair value of stock-based awards. The Black-Scholes option pricing model incorporates various subjective assumptions, including expected term and expected volatility. Expected volatility was determined based on the historical volatilities of the Company.

The table below shows the assumptions used for the stock options granted during the six months ended June 30, 2024. The Company did not grant any stock options during the six months ended June 30, 2025.

Dividend yield 2.45%
Expected volatility 40.80%
Risk-free interest rate 4.29%
Expected term (in years) 6.5
Weighted average grant date fair value $ 6.04

Stock option expense of $32,000 and $0.1 million is included in “Salaries and employee benefits” in the accompanying consolidated statements of income for the three and six months ended June 30, 2025, respectively, and $40,000 and $0.1 million for the three and six months ended June 30, 2024, respectively. At  June 30, 2025, there was $0.3 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 2.9 years.

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

Six months ended June 30,
2025 2024
Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price
Outstanding, beginning of period 260,602 $ 18.37 326,605 $ 17.32
Granted — — 29,997 16.35
Exercised (34,000 ) 15.74 (96,000 ) 14.16
Outstanding, end of period 226,602 $ 18.77 260,602 $ 18.37
Exercisable, end of period 168,786 $ 19.64 174,872 $ 19.15

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock and RSUs

Under the Plan, the Company  maygrant restricted stock, RSUs, and other stock-based awards to Plan participants, subject to forfeiture upon the occurrence of certain events until the vesting dates specified in the participant’s award agreement. Historically, the Company granted restricted stock awards to Plan participants. Beginning in 2019, the Company began granting time vested RSUs to its non-employee directors and certain officers of the Company instead, with vesting terms ranging from two years to five years. The RSUs do not have voting rights and do not receive dividends or dividend equivalents. As of  *May 1, 2023,*all of the previously granted shares of restricted stock had vested, and only outstanding RSUs remained.

Compensation expense for RSUs, which is calculated based on the market price of the Company’s common stock at the grant date applied to the total number of units granted, is recognized on a straight-line basis over the requisite service period of generally five years for employees and, through the end of 2024, two years for non-employee directors. Beginning on January 1, 2025, grants of RSUs to non-employee directors generally vest over a service period of five years. Upon vesting of RSUs, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the consolidated statements of income.

Compensation expense related RSUs of $0.5 million and $0.9 million is included in the accompanying consolidated statements of income for the three and six months ended June 30, 2025, respectively, and $0.5 million and $0.8 million for the three and six months ended June 30, 2024, respectively. The unearned compensation related to these awards is amortized to compensation expense over the vesting period. As of  June 30, 2025, unearned stock-based compensation cost associated with these awards totaled approximately $5.3 million and is expected to be recognized over a weighted average period of 3.6 years.

The following table summarizes the RSU activity for the periods presented.

Six months ended June 30,
2025 2024
Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
Balance, beginning of period 323,820 $ 16.65 336,749 $ 17.37
Granted 134,182 17.76 110,886 16.41
Forfeited (4,760 ) 16.37 (25,266 ) 17.06
Earned and issued (104,377 ) 17.65 (95,644 ) 18.81
Balance, end of period 348,865 $ 16.78 326,725 $ 16.65

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS

As part of its liability management, the Company has historically utilized pay-fixed interest rate swaps to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the 1-month SOFR associated with the forecasted issuances of 1-month fixed rate debt arising from a rollover strategy. To mitigate credit risk, securities were pledged to the Company by the counterparties in an amount greater than or equal to the gain position of the derivative contracts. Conversely, securities were pledged to the counterparties by the Company in an amount greater than or equal to the loss position of the derivative contracts, if applicable. There were no assets or liabilities recorded in the accompanying consolidated balance sheets at June 30, 2025 or  December 31, 2024 associated with the swap contracts, other than interest rate swaps related to customer loans, described below.

Customer Derivatives – Interest Rate Swaps

The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”), and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC Topic 820, “Fair Value Measurement” (“ASC 820”). The Company did not recognize any net gains or losses in other operating income resulting from fair value adjustments of these swap agreements during the three and six months ended June 30, 2025 and 2024.

The table below presents the notional amounts and fair values of the Company’s derivative financial instruments as well as their classification on the accompanying consolidated balance sheets at  June 30, 2025 and  December 31, 2024 (dollars in thousands).

Fair Value
Notional^(1)^ Derivative Assets^(2)^ Derivative Liabilities^(2)^
June 30, 2025
Interest rate swaps $ 371,230 $ 13,096 $ 13,096
December 31, 2024
Interest rate swaps $ 373,845 $ 17,195 $ 17,195
^(1)^ At  June 30, 2025 the Company had notional amounts of $185.6 million in interest rate swap contracts with customers and $185.6 million in offsetting interest rate swap contracts with other financial institutions. At  December 31, 2024 the Company had notional amounts of $186.9 million in interest rate swap contracts with customers and $186.9 million in offsetting interest rate swap contracts with other financial institutions.
--- ---
^(2)^ Derivative assets and liabilities are reported at fair value in “Other assets” and “Accrued taxes and other liabilities,” respectively, in the accompanying consolidated balance sheets.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8. FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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

The Company holds SBIC qualified funds and other investment funds that do not have a readily determinable fair value. In accordance with ASC 820, these investments are measured at fair value using the net asset value practical expedient and are not required to be classified in the fair value hierarchy. At both  June 30, 2025 and  December 31, 2024, the fair values of these investments were $3.8 million and are included in “Other assets” in the accompanying consolidated balance sheets.

Fair Value Hierarchy

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

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

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

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

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

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following methods and assumptions were used by the Company in estimating the fair value of assets and liabilities valued on a recurring basis:

AFS Investment Securities and Marketable Equity Securities – Where quoted prices are available in an active market, the Company classifies the securities within level 1 of the valuation hierarchy. Securities are defined as both long and short positions. Level 1 securities include marketable equity securities in corporate stocks and mutual funds.

If quoted market prices are not available, the Company estimates fair values using pricing models and discounted cash flows that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy if observable inputs are available, include obligations of the U.S. Treasury and U.S. government agencies and corporations, obligations of state and political subdivisions, corporate bonds, residential mortgage-backed securities, and commercial mortgage-backed securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, the Company classifies those securities in level 3.

Management monitors the current placement of securities in the fair value hierarchy to determine whether transfers between levels may be warranted based on market reference data, which may include reported trades; bids, offers or broker/dealer quotes; benchmark yields and spreads; as well as other reference data. At June 30, 2025 and  December 31, 2024, substantially all of the Company’s level 3 investments were obligations of state and political subdivisions. The Company estimated the fair value of these level 3 investments using discounted cash flow models, the key inputs of which are the coupon rate, current spreads to the yield curves, and expected repayment dates, adjusted for illiquidity of the local municipal market and sinking funds, if applicable. Option-adjusted models may be used for structured or callable notes, as appropriate.

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

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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).

Estimated Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs
Fair Value (Level 1) (Level 2) (Level 3)
June 30, 2025
Assets:
Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 17,173 $ — $ 17,173 $ —
Obligations of state and political subdivisions 15,750 — 12,282 3,468
Corporate bonds 25,006 — 25,006 —
Residential mortgage-backed securities 233,304 — 233,304 —
Commercial mortgage-backed securities 64,475 — 64,475 —
Equity securities at fair value 2,570 2,570 — —
Interest rate swaps - gross assets 13,096 — 13,096 —
Total assets $ 371,374 $ 2,570 $ 365,336 $ 3,468
Liabilities:
Interest rate swaps - gross liabilities $ 13,096 $ — $ 13,096 $ —
December 31, 2024
Assets:
Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 15,707 $ — $ 15,707 $ —
Obligations of state and political subdivisions 16,120 — 11,803 4,317
Corporate bonds 27,267 — 26,773 494
Residential mortgage-backed securities 208,768 — 208,768 —
Commercial mortgage-backed securities 63,259 — 63,259 —
Equity securities at fair value 2,593 2,593 — —
Interest rate swaps - gross assets 17,195 — 17,195 —
Total assets $ 350,909 $ 2,593 $ 343,505 $ 4,811
Liabilities:
Interest rate swaps - gross liabilities $ 17,195 $ — $ 17,195 $ —

Table of Contents

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the Company’s ability to observe inputs to the valuation may cause reclassification of certain assets or liabilities within the fair value hierarchy. The tables below provide a reconciliation for assets measured at fair value on a recurring basis using significant unobservable inputs, or level 3 inputs, for the six months ended June 30, 2025 and 2024 (dollars in thousands).

Obligations of State and Political Subdivisions Corporate Bonds
Balance at December 31, 2024 $ 4,317 $ 494
Realized gain (loss) included in earnings — —
Unrealized gain included in other comprehensive income 68 6
Purchases — —
Sales — —
Maturities, prepayments, and calls (917 ) (500 )
Transfers into level 3 — —
Transfers out of level 3 — —
Balance at June 30, 2025 $ 3,468 $ —
Obligations of State and Political Subdivisions Corporate Bonds
--- --- --- --- --- ---
Balance at December 31, 2023 $ 5,250 $ 463
Realized gain (loss) included in earnings — —
Unrealized (loss) gain included in other comprehensive loss (856 ) 12
Purchases — —
Sales — —
Maturities, prepayments, and calls (27 ) —
Transfers into level 3 — —
Transfers out of level 3 — —
Balance at June 30, 2024 $ 4,367 $ 475

There were no liabilities measured at fair value on a recurring basis using level 3 inputs at June 30, 2025 and  December 31, 2024. For the six months ended June 30, 2025 and 2024, there were no gains or losses included in earnings related to the change in fair value of the assets measured on a recurring basis using significant unobservable inputs held at the end of the period.

The following table provides quantitative information about significant unobservable inputs used in fair value measurements of level 3 assets measured at fair value on a recurring basis at June 30, 2025 and  December 31, 2024 (dollars in thousands).

Estimated Fair Value Valuation Technique Unobservable Inputs Range of Discounts
June 30, 2025
Obligations of state and political subdivisions $ 3,468 Option-adjusted discounted cash flow model; present value of expected future cash flow model Bond appraisal adjustment^(1)^ 0% - 9%
December 31, 2024
Obligations of state and political subdivisions $ 4,317 Option-adjusted discounted cash flow model; present value of expected future cash flow model Bond appraisal adjustment^(1)^ 2% - 15%
Corporate bonds 494 Option-adjusted discounted cash flow model; present value of expected future cash flow model Bond appraisal adjustment^(1)^ 1%
^(1)^ Fair values determined through valuation analysis using coupon, yield (discount margin), liquidity and expected repayment dates.
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Table of Contents

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following methods and assumptions were used by the Company in estimating the fair value of assets and liabilities valued on a nonrecurring basis:

Loans Individually Evaluated – For collateral dependent loans where the borrower is experiencing financial difficulty the expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, which is based on third party appraisals. Individually evaluated loans that are not collateral dependent are evaluated based on a discounted cash flow methodology. Credits deemed uncollectible are charged to the ACL. Since not all valuation inputs are observable, these nonrecurring fair value determinations are classified as level 3.

Other Real Estate Owned– Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure and real property no longer used in the Bank’s business operations. Real estate acquired through foreclosure is initially recorded at fair value at the time of foreclosure, less estimated selling cost, and any related write-down is charged to the ACL. Real property no longer used in the Bank’s business operations is recorded at the lower of its net book value or fair value at the date of transfer to other real estate owned. Subsequently, it  maybe necessary to record nonrecurring fair value adjustments for declines in fair value. Fair value, when recorded, is determined based on appraisals by qualified licensed appraisers and adjusted for management’s estimates of costs to sell. Accordingly, values for other real estate owned are classified as level 3.

Quantitative information about assets measured at fair value on a nonrecurring basis based on significant unobservable inputs (level 3) is summarized below as of  June 30, 2025 and  December 31, 2024. There were no liabilities measured on a nonrecurring basis at June 30, 2025 or December 31, 2024 (dollars in thousands).

Estimated Fair Value Valuation Technique Unobservable Inputs Range of Discounts Weighted Average Discount^(3)^
June 30, 2025
Loans individually evaluated for impairment^(1)^ $ 2,724 Discounted cash flows; underlying collateral value Collateral discounts and estimated costs to sell 1% - 47% 7%
Other real estate owned^(2)^ 1,959 Underlying collateral value, third party appraisals Collateral discounts and discount rates 13% - 14% 13%
December 31, 2024
Loans individually evaluated for impairment^(1)^ $ 2,174 Discounted cash flows; underlying collateral value Collateral discounts and estimated costs to sell 0% - 79% 31%
Other real estate owned^(2)^ 900 Underlying collateral value, third party appraisals Collateral discounts and discount rates 18% 18%
^(1)^ Loans individually evaluated for impairment that were re-measured during the period had a carrying value of $2.9 million and $2.4 million at  June 30, 2025 and  December 31, 2024, respectively, with related ACL of $0.2 million as of such dates.
--- ---
^(2)^ Other real estate owned that was re-measured during the period had a carrying value of $2.0 million at  June 30, 2025. During the six months ended June 30, 2025, the Company recorded a $0.3 million write-down of other real estate owned which is included as part of “Other operating expenses” in noninterest expense on the accompanying consolidated statement of income. Other real estate owned that was re-measured during the period had a carrying value of $0.9 million at  December 31, 2024. During the six months ended June 30, 2024, the Company recorded a $0.2 million write-down of other real estate owned which is included as part of “Other operating expenses” in noninterest expense on the accompanying consolidated statement of income.
^(3)^ Weighted by relative fair value.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Financial Instruments

Accounting guidance requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring or nonrecurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.

Cash and Cash Equivalents – For these short-term instruments, the fair value is the carrying value. The Company classifies these assets in level 1 of the fair value hierarchy.

Investment Securities and Equity Securities – The fair value measurement techniques and assumptions for AFS securities and marketable equity securities is discussed earlier in the note. The same measurement techniques and assumptions were applied to the valuation of HTM securities and nonmarketable equity securities including equity in correspondent banks.

Loans – The fair value of portfolio loans, net is determined using an exit price methodology. The exit price methodology is based on a discounted cash flow analysis, in which projected cash flows are based on contractual cash flows adjusted for prepayments for certain loan types (e.g., residential mortgage loans and multifamily loans) and the use of a discount rate based on expected relative risk of the cash flows. The discount rate selected considers loan type, maturity date, a liquidity premium, cost to service, and cost of capital, which is a level 3 fair value estimate.

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

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

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

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

Subordinated Debt Securities – The fair value of subordinated debt is estimated based on current market rates on similar debt in the market. The Company classifies this debt in level 2 of the fair value hierarchy.

Derivative Financial Instruments – The fair value measurement techniques and assumptions for derivative financial instruments is discussed earlier in the note.

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

June 30, 2025
Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3
Financial assets:
Cash and cash equivalents $ 55,224 $ 55,224 $ 55,224 $ — $ —
Investment securities - AFS 355,708 355,708 — 352,240 3,468
Investment securities - HTM 41,528 43,690 — 1,744 41,946
Equity securities at fair value 2,570 2,570 2,570 — —
Nonmarketable equity securities 15,082 15,082 — 15,082 —
Loans, net of allowance 2,079,735 1,980,299 — — 1,980,299
Interest rate swaps - gross assets 13,096 13,096 — 13,096 —
Financial liabilities:
Deposits, noninterest-bearing $ 448,459 $ 448,459 $ — $ 448,459 $ —
Deposits, interest-bearing 1,889,726 1,799,688 — — 1,799,688
FHLB short-term advances and repurchase agreements 21,023 21,023 — 21,023 —
FHLB long-term advances 60,000 59,899 — — 59,899
Junior subordinated debt 8,782 8,782 — — 8,782
Subordinated debt 16,717 14,995 — 14,995 —
Interest rate swaps - gross liabilities 13,096 13,096 — 13,096 —
December 31, 2024
--- --- --- --- --- --- --- --- --- --- ---
Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3
Financial assets:
Cash and cash equivalents $ 27,922 $ 27,922 $ 27,922 $ — $ —
Investment securities - AFS 331,121 331,121 — 326,310 4,811
Investment securities - HTM 42,687 42,144 — 1,821 40,323
Equity securities at fair value 2,593 2,593 2,593 — —
Nonmarketable equity securities 16,502 16,502 — 16,502 —
Loans, net of allowance 2,098,363 1,973,780 — — 1,973,780
Interest rate swaps - gross assets 17,195 17,195 — 17,195 —
Financial liabilities:
Deposits, noninterest-bearing $ 432,143 $ 432,143 $ — $ 432,143 $ —
Deposits, interest-bearing 1,913,801 1,826,868 — — 1,826,868
FHLB short-term advances and repurchase agreements 15,591 15,577 — 15,577 —
FHLB long-term advances 60,000 59,620 — — 59,620
Junior subordinated debt 8,733 8,733 — — 8,733
Subordinated debt 16,697 14,738 — 14,738 —
Interest rate swaps - gross liabilities 17,195 17,195 — 17,195 —

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9. INCOME TAXES

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

Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Income tax expense $ 935 $ 829 $ 2,356 $ 2,209
Effective tax rate 17.2 % 17.0 % 17.9 % 20.1 %

For the three and six months ended June 30, 2025, and the three months ended  June 30, 2024 the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI. For the six months ended June 30, 2024, the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of approximately $8.4 million of BOLI contracts, which resulted in $0.3 million of income tax expense.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Unfunded Commitments

The Company is a party to financial instruments with off-balance sheet risk entered into in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit consisting of loan commitments and standby letters of credit, which are not included in the accompanying financial statements. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the ACL on loans. The reserve for unfunded loan commitments was

$0.1 million and $42,000 at  June 30, 2025 and  December 31, 2024, respectively, and is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets.

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

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

June 30, 2025 December 31, 2024
Loan commitments $ 358,415 $ 377,301
Standby letters of credit 7,251 7,658

Additionally, at June 30, 2025, the Company had unfunded commitments of $0.9 million for its investments in SBIC qualified funds and other investment funds.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11. LEASES

The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch operations. The Company’s lease agreements under which its branch locations are operated have all been designated as operating leases. The Company does not lease equipment under operating leases, nor does it have leases designated as finance leases.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which the Company has elected to account for separately, as the non-lease component amounts are readily determinable.

Quantitative information regarding the Company’s operating leases is presented below as of and for the six months ended June 30, 2025 and 2024 (dollars in thousands).

June 30,
2025 2024
Total operating lease cost $ 225 $ 217
Weighted-average remaining lease term (in years) 5.2 6.2
Weighted-average discount rate 3.4 % 3.3 %

At both  June 30, 2025 and  December 31, 2024, the Company’s operating lease ROU assets were $2.0 million, and the Company’s related operating lease liabilities were $2.1 million. The Company’s operating leases have remaining terms ranging from approximately two to six years, including extension options if the Company is reasonably certain they will be exercised.

Future minimum lease payments due under non-cancelable operating leases at June 30, 2025 are presented below (dollars in thousands).

Remainder of 2025 $ 228
2026 459
2027 459
2028 405
2029 337
Thereafter 350
Total $ 2,238

At June 30, 2025, the Company had not entered into any material leases that have not yet commenced.

The Bank owns its corporate headquarters building, the first floor of which is occupied by multiple tenants. The Bank, as lessor, also leases a portion of one of its branch locations and a former stand-alone ATM location. All tenant leases are operating leases. The Bank, as lessor, recognized lease income of $0.1 million and $0.2 million for the three and six month periods ended June 30, 2025 and 2024, respectively.

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INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 12. SUBSEQUENT EVENTS

Agreement and Plan of Merger with Wichita Falls Bancshares, Inc.

On July 1, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WFB, the holding company for First National Bank, headquartered in Wichita Falls, Texas. The Merger Agreement provides for the merger of WFB with and into the Company, with the Company as the surviving corporation. Immediately following the merger, First National Bank will be merged with and into the Bank, with the Bank as the surviving bank.

Under the terms of the Merger Agreement, all of the issued and outstanding shares of WFB common stock will be converted into and represent the right to receive in the aggregate $7.2 million in cash from the Company and 3,955,344 shares of Company common stock, subject to certain adjustments. Based on the Company’s closing stock price of $19.32 as of June 30, 2025, the transaction is valued at approximately $83.6 million in the aggregate. First National Bank operates seven branches and two mortgage offices in north Texas and had approximately $1.4 billion in assets at June 30, 2025.

Consummation of the transactions contemplated by the Merger Agreement is subject to various customary conditions, including, without limitation, the approval of the shareholders of each of the Company and WFB; the receipt of certain regulatory approvals; the accuracy of the representations and warranties of the parties and compliance by the parties with their respective covenants and obligations under the Merger Agreement (subject to customary materiality qualifiers); and the absence of a material adverse change with respect to WFB.

The Merger Agreement contains certain termination rights, including the right, subject to certain exceptions, of either party to terminate the Merger Agreement if the closing has not occurred by *March 31, 2026 (*or June 30, 2026 if the only outstanding closing condition is the receipt of all required regulatory approvals), and the right of WFB to terminate the Merger Agreement, subject to certain conditions, to accept a business combination transaction deemed by its board of directors to be superior to the proposed merger. The Merger Agreement provides for the payment by WFB of a termination fee of $3,300,000 upon the termination of the Merger Agreement under certain circumstances.

Private Placement of Series A Preferred Stock

On July 1, 2025, the Company completed a private placement of 32,500 shares of its newly designated Series A Preferred Stock at a purchase price of $1,000 per share pursuant to securities purchase agreements (collectively, the “Securities Purchase Agreements”) with certain institutional and other accredited investors, for aggregate gross proceeds to the Company of $32.5 million. The net proceeds of the private placement were approximately $30.4 million, after deducting placement agent fees and other offering related expenses. The Company intends to use the net proceeds from the private placement to support the acquisition of WFB and for general corporate purposes, including organic growth and other potential acquisitions. The Series A Preferred Stock is intended to qualify as additional Tier 1 capital of the Company. At June 30, 2025, the Company had received advanced proceeds from the private placement of $17.3 million, which are included in “Cash and cash equivalents” in the accompanying consolidated balance sheet, and the Company recorded a corresponding liability, which is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheet.

The relative preferences, rights and limitations of the Series A Preferred Stock are set forth in the Company’s Restated Articles of Incorporation, as amended by the Articles of Amendment effective as of *June 30, 2025 (*as amended, the “Restated Articles”). Pursuant to the Restated Articles, holders of the Series A Preferred Stock are entitled to receive, when, as and if authorized by the Board, on a non-cumulative basis, quarterly cash dividends at an annual rate equal to 6.5% on the liquidation preference of $1,000 per share, payable in arrears on January 1, April 1, July 1 and October 1 of each year commencing on October 1, 2025. Subject to certain exceptions, the Company is prohibited from paying dividends on, or repurchasing or redeeming its common stock, unless full dividends for the Series A Preferred Stock’s most recently completed dividend period have been declared and paid on all outstanding shares of Series A Preferred Stock. Holders of Series A Preferred Stock have the right, at any time and from time to time, at such holder’s option to convert all or any portion of their Series A Preferred Stock into shares of the Company’s common stock at the rate of 47.619 shares of common stock per share of Series A Preferred Stock (subject to certain adjustments) (the “Conversion Rate”), plus cash in lieu of fractional shares of common stock. The maximum number of shares of common stock that may be issued upon conversion is 1,600,000 (subject to certain adjustments as described in the Restated Articles). In addition, subject to certain conditions, on or after July 1, 2028, the Company will have the right, at its option, from time to time on any dividend payment date, to cause some or all of the Series A Preferred Stock to be converted into shares of the Company’s common stock at the Conversion Rate if, for 20 trading days within a period of 30 consecutive trading days, the closing price of the Company’s common stock exceeds $26.25 per share (subject to certain adjustments). The Series A Preferred Stock has no maturity date and is perpetual unless redeemed by the Company or converted in accordance with the Restated Articles. Subject to certain conditions, the Company may redeem, from time to time, in whole or in part, shares of Series A Preferred Stock on any dividend payment date occurring on or after July 1, 2030 at a redemption price of $1,000 per share, plus all declared but unpaid dividends thereon, without regard to, or accumulation of, any undeclared dividends. Holders of the Series A Preferred Stock have no voting rights, except with respect to certain changes in the terms of the Series A Preferred Stock, certain fundamental business transactions and as otherwise required by applicable law.

If the Company voluntarily or involuntarily liquidates, dissolves or winds up, each holder will be entitled to receive, before any distribution of assets or proceeds is made to holders of the Company’s common stock, cash liquidating distributions in an amount equal to the greater of (i) the liquidation preference of $1,000 per share of, plus all declared but unpaid dividends thereon, without regard to, or accumulation of, any undeclared dividends, and (ii) the amount that such holder would have received in respect of the common stock issuable upon conversion of Series A Preferred Stock had such holder converted such share of Series A Preferred Stock immediately prior to such time. Upon the occurrence of specified “Reorganization Events” as defined in the Restated Articles, such as a merger in which the Company’s common stock is converted into other consideration, each share of Series A Preferred Stock outstanding immediately prior to such Reorganization Event will be entitled to receive, before any distribution of such assets or proceeds is made to holders of the Company’s common stock, in full, the greater of (i) the amount per share equal to the liquidation value of $1,000 per share, plus all declared but unpaid dividends thereon, without regard to, or accumulation of, any undeclared dividends, and (ii) the amount equal to the distribution amount of such assets or proceeds of the Company as was receivable by a holder of the number of shares of the Company’s common stock into which such share of Series A Preferred Stock was convertible immediately prior to such Reorganization Event.

The shares of Series A Preferred Stock sold in the private placement have not been registered under the Securities Act in reliance on the exemption from registration in Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D of the SEC promulgated under the Securities Act, and, as a result, the shares may not be offered or sold in the U.S. absent a registration statement or exemption from registration.

The Securities Purchase Agreements contain representations and warranties, covenants, and indemnification provisions that are customary for private placements of shares of convertible preferred stock by companies that have securities registered with the SEC. In connection with the execution of the Securities Purchase Agreements, the Company and each of the purchasers entered into a Registration Rights Agreement, pursuant to which the Company agreed at its expense, subject to certain exceptions, to file with the SEC a registration statement to register the resale of the shares of the Company’s common stock issuable to the holders of the Series A Preferred Stock upon conversion thereof. The Company’s obligation to have an effective registration statement covering the resale of the shares of common stock underlying the Series A Preferred Stock continues until such securities (i) are sold or otherwise transferred under an effective registration statement under the Securities Act, (ii) cease to be outstanding, (iii) are transferred in a transaction in which the purchaser’s rights are not assigned to the transferee of the securities, (iv) are sold in accordance with Rule 144 promulgated under the Securities Act (“Rule 144”), or (v) become eligible for resale without volume or manner-of-sale restrictions under Rule 144 (or any successor rule then in effect) and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.

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

Cautionary Note Regarding Forward-Looking Statements

When included in this Quarterly Report on Form 10-Q, or in other documents that Investar Holding Corporation files with the 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:

• the significant risks and uncertainties for our business, results of operations and financial condition, as well as our regulatory capital and liquidity ratios and other regulatory requirements caused by business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate, including heightened uncertainties resulting from recent changing trade and tariff policies that could have an adverse impact on inflation and economic growth at least in the near term;
• changes in inflation, interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;
--- ---
• our ability to successfully execute our strategy focused on consistent, quality earnings through the optimization of our balance sheet, and our ability to successfully execute a long-term growth strategy;
• our ability to achieve organic loan and deposit growth, and the composition of that growth;
• our ability to identify and enter into agreements to combine with attractive acquisition candidates, finance acquisitions, complete acquisitions after definitive agreements are entered into, and successfully integrate and grow acquired operations;
• our potential growth, including our entrance or expansion into new markets, and the need for sufficient capital to support that growth;
• a reduction in liquidity, including as a result of a reduction in the amount of deposits we hold or other sources of liquidity, which may be caused by, among other things, disruptions in the banking industry similar to those that occurred in early 2023 that caused bank depositors to move uninsured deposits to other banks or alternative investments outside the banking industry;
--- ---
• inaccuracy of the assumptions and estimates we make in establishing reserves for credit losses and other estimates;
--- ---
• changes in the quality or composition of our loan portfolio, including adverse developments in borrower industries or in the repayment ability of individual borrowers;
--- ---
• changes in the quality and composition of, and changes in unrealized losses in, our investment portfolio, including whether we may have to sell securities before their recovery of amortized cost basis and realize losses;
--- ---
• 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;
--- ---
• the concentration of our business within our geographic areas of operation in Louisiana, Texas and Alabama;
--- ---
• risks to holders of our common stock relating to our Series A Preferred Stock, including but not limited to dividend preferences to holders of the preferred stock, other conditions with respect to the payment of dividends on our common stock, potential dilution upon conversion of the preferred stock, and liquidation preferences to holders of the preferred stock;
• increasing costs of complying with new and potential future regulations;
--- ---
• new or increasing geopolitical tensions, including resulting from wars in Ukraine and Israel and surrounding areas;
--- ---
• the emergence or worsening of widespread public health challenges or pandemics;
--- ---
• concentration of credit exposure;
--- ---
• any deterioration in asset quality and higher loan charge-offs, and the time and effort necessary to resolve problem assets;
--- ---
• fluctuations in the price of oil and natural gas;
--- ---
• data processing system failures and errors;
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• risks associated with our digital transformation process, including increased risks of cyberattacks and other security breaches and challenges associated with addressing the increased prevalence of artificial intelligence;
• risks of losses resulting from increased fraud attacks against us and others in the financial services industry;
--- ---
• potential impairment of our goodwill and other intangible assets;
--- ---
• the impact of litigation and other legal proceedings to which we become subject;
--- ---
• competitive pressures in the commercial finance, retail banking, mortgage lending and consumer finance industries, as well as the financial resources of, and products offered by, competitors;
--- ---
• the impact of changes in laws and regulations applicable to us, including banking, securities and tax laws and regulations and accounting standards, as well as changes in the interpretation of such laws and regulations by our regulators;
--- ---
• changes in the scope and costs of FDIC insurance and other coverages;
--- ---
• governmental monetary and fiscal policies; and
--- ---
• hurricanes, tropical storms, tropical depressions, floods, winter storms, droughts and other adverse weather events, all of which have affected the Company’s market areas from time to time; other natural disasters; oil spills and other man-made disasters; acts of terrorism; other international or domestic calamities; acts of God; and other matters beyond our control.
--- ---

Forward-Looking and Cautionary Statements Relating to the Pending Wichita Falls Transaction

With respect to the pending WFB transaction, forward-looking statements include, but are not limited to, statements about the potential benefits of the transaction, including future financial and operating results; statements about the Company’s plans, objectives, expectations and intentions; statements about the expected timing of completion of the proposed merger; and other statements that are not historical facts. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties relating to: (i) the ability to obtain the requisite shareholder approvals; (ii) the risk that the Company may be unable to obtain governmental and regulatory approvals required to consummate the proposed merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; (iii) the risk that a condition to closing may not be satisfied; (iv) the timing to consummate the proposed merger; (v) the risk that the businesses will not be integrated successfully; (vi) the risk that the cost savings and any other synergies from the proposed merger may not be fully realized or may take longer to realize than expected; (vii) disruption from the proposed merger making it more difficult to maintain relationships with customers, employees or vendors; and (viii) the diversion of management time on merger-related issues.

These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Part I. Item 1A. “Risk Factors” and Part II. Item 7. “MD&A – Cautionary Note Regarding Forward-Looking Statements” in the Company’s Annual Report and in Part II. Item 1A. “Risk Factors” of this report.

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.

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Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, income and expenses and related disclosure of contingent assets and liabilities. Although independent third parties are often engaged to assist us in the estimation process, management evaluates the results, challenges assumptions used and considers other factors which could impact these estimates. Actual results may differ from these estimates under different assumptions or conditions.

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are significant accounting policies and developing critical accounting estimates, which are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe that the judgments, estimates and assumptions that we use in the preparation of our consolidated financial statements are appropriate. For more detailed information about our accounting policies, please refer to Note 1. Summary of Significant Accounting Policies of our Annual Report.

Company Overview

This section presents management’s perspective on the consolidated financial condition and results of operations of the Company and its wholly-owned subsidiary, 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, 2024, including the notes thereto, and the related MD&A in the Annual Report. All cross-references to the “Notes” in this Form 10-Q refer to the Notes to Consolidated Financial Statements contained in Part I. Item 1. Financial Statements unless otherwise noted.

The Bank commenced operations in 2006, and we completed our initial public offering in July 2014. On July 1, 2019, the Bank changed from a Louisiana state bank charter to a national bank charter, and its name changed to Investar Bank, National Association. Through the Bank, we provide full banking services, excluding trust services, tailored primarily to meet the needs of individuals, professionals, and small to medium-sized businesses. Our primary areas of operation are south Louisiana, including Baton Rouge, New Orleans, Lafayette, Lake Charles, and their surrounding areas; southeast Texas, primarily Houston and its surrounding area; and Alabama, including York and Oxford and their surrounding areas. At June 30, 2025, we operated 29 full service branches comprised of 20 full service branches in Louisiana, three full service branches in Texas, and six full service branches in Alabama. We opened a loan and deposit production office in our Texas market in the first quarter of 2024 and converted it to a full-service branch location in the fourth quarter of 2024. We have continued to evaluate opportunities to improve our branch network efficiency, leverage our digital initiatives, and further reduce costs. We closed one branch in our Alabama market during the first quarter of 2024.

Our strategy focuses on consistent, quality earnings through the optimization of our balance sheet. Our strategy includes originating and renewing high quality, primarily variable-rate, loans and allowing higher risk credit relationships to run off. We have kept duration short on our liabilities to provide flexibility to secure lower cost funding that was accretive to our net interest margin. Our strategy also includes growth through acquisitions, including whole-bank acquisitions, strategic branch acquisitions and asset acquisitions. We have completed seven whole-bank acquisitions since 2011 and regularly review acquisition opportunities. Our most recent whole bank acquisition was completed in April 2021. On July 1, 2025, we announced that we had entered into a definitive agreement to acquire WFB. For additional information, see Note 12. Subsequent Events and “Pending Acquisition of WFB” below.

Our principal business is lending to and accepting deposits from individuals and small to medium-sized businesses in our areas of operation. As a financial holding company operating through one reportable segment, 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. Our principal expenses are interest expense on interest-bearing customer deposits and borrowings, salaries and 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.

Pending Acquisition of WFB

On July 1, 2025, we announced that we had entered into a definitive agreement to acquire WFB, headquartered in Wichita Falls, Texas and its wholly-owned subsidiary, First National Bank. First National Bank operates seven branches and two mortgage offices in north Texas and had approximat ely $1.4 billion in assets at June 30, 2025. The closing of the transaction is subject to the satisfaction of all closing conditions, including the receipt of all required regulatory and shareholder approvals. For additional information, see Note 12. Subsequent Events.

Private Placement of Series A Preferred Stock

In connection with the WFB transaction, on July 1, 2025 we completed a private placement of 32,500 shares of our newly designated Series A Preferred Stock at a price of $1,000 per share, for aggregate gross proceeds of $32.5 million. For additional information, see Note 12. Subsequent Events.

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Certain Events That Affect Period-over-Period Comparability

Changing Inflation and **InterestRates. Inflation increased rapidly during 2021 through June 2022. After June 2022, the rate of inflation generally declined although it has remained above the Federal Reserve’s target inflation rate of 2%. In response, the Federal Reserve raised the federal funds target rate multiple times from March 2022 through July 2023. During 2023, the Federal Reserve raised the federal funds target rate four times, from 4.25% to 4.50%, to 5.25% to 5.50%. During 2024, beginning in September 2024, the Federal Reserve reduced the federal funds target rate three times by 100 basis points on a cumulative basis to 4.25% to 4.50%. Accordingly, the prevailing federal funds target rate for the six months ended June 30, 2025 was 100 basis points lower than for the six months ended June 30, 2024.

Disruptions in the Banking Industry. Between March 10, 2023 and March 12, 2023, state banking supervisors closed Silicon Valley Bank and Signature Bank and named the FDIC as receiver. At the time of closure, they were among the 30 largest U.S. banks. While the reasons for their failure are complex and have not been fully investigated, reports indicate that, among other things, both banks had grown in asset size in recent periods at a faster rate than their peers, had large proportions of uninsured deposits (approximately 87.5% and 89.7% of total deposits, respectively) and high unrealized losses on investment securities. Silicon Valley Bank’s business strategy focused on serving the technology and venture capital sectors, and Signature Bank had significant exposure to deposits from the digital asset industry. Prior to their closure, both banks experienced sudden and rapid deposit withdrawals. These events caused bank deposit customers, particularly those with uninsured deposits, to become concerned regarding the safety of their deposits, and in some cases caused customers to withdraw deposits. In response to the disruptions, among other things, the Federal Reserve announced a new BTFP to provide eligible banks with loans of up to one-year maturity backed by collateral pledged at par value. On April 24, 2023, San Francisco-based First Republic Bank, also among the 30 largest U.S. banks, reported a large deposit outflow and substantially reduced net income. First Republic Bank also had a large proportion of uninsured deposits (67% as of December 31, 2022). On May 1, 2023, regulators seized First Republic Bank and sold all of its deposits and most of its assets to JPMorgan Chase Bank.

In response to the disruptions and related publicity, we formed an internal task force that included members of our ALCO. The task force met frequently to review our liquidity position and liquidity sources, and oversaw the Bank’s process to qualify for the BTFP. In addition, we took steps to inform our customers about our financial position, liquidity and insured deposit products. During the second quarter of 2023, we utilized the BTFP and reduced FHLB advances. The Bank utilized this source of funding due to its lower rate, the ability to prepay the obligations without penalty, and as a means to lock in funding. During the fourth quarter of 2023 and again in the first quarter of 2024, the Bank refinanced its BTFP borrowings with new borrowings under the program due to more favorable rates. The Federal Reserve ceased making new loans under the BTFP on March 11, 2024. During the third quarter of 2024, we began paying down borrowings under the BTFP and repaid all of the remaining borrowings under the BTFP in the fourth quarter of 2024. As of June 30, 2025, estimated uninsured deposits represented approximately 34% of our total deposits. For additional information, see “Discussion and Analysis of Financial Condition – “Deposits,” “Borrowings,” “Liquidity and Capital Resources” and our Annual Report, Part II. Item 1A. Risk Factors.

Branch Activity. We closed one branch in Anniston, Alabama in January 2024. In October 2024, we converted an existing loan and deposit production office in our Texas market to a full-service branch location.

Subordinated Debt Repurchases. During the first quarter of 2024, we repurchased $1.0 million in principal amount of our 2032 Notes. During the second quarter of 2024, we repurchased $5.0 million in principal amount of our 2029 Notes and $2.0 million in principal amount of our 2032 Notes.

***Subordinated Debt Redemption.***During the fourth quarter of 2024, we redeemed all of the remaining $20.0 million in principal amount of the 2029 Notes. As of June 30, 2025 and December 31, 2024 our outstanding subordinated debt consisted of $17.0 million in principal amount of our 2032 Notes.

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

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

We recorded an impairment charge of $21.6 million related to this relationship during the third quarter of 2021. As of June 30, 2025, we have recorded total recoveries on the relationship of approximately $7.9 million on a cumulative basis. At June 30, 2025, our other real estate owned related to this relationship included two remaining properties with a total cost basis of $1.5 million, which we are actively marketing for sale. Upon sale of these properties, we will have arrived at final resolution of this loan relationship.

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Overview of Financial Condition and Results of Operations

Total assets increased $25.3 million, or 0.9%, to $2.75 billion at June 30, 2025, compared to $2.72 billion at December 31, 2024. For the six months ended June 30, 2025, net income was $10.8 million, or $1.09 per diluted common share, compared to net income of $8.8 million, or $0.89, per diluted common share for the six months ended June 30, 2024.

At June 30, 2025, the Company and Bank each were in compliance with all regulatory capital requirements, and the Bank was considered “well-capitalized” under the FDIC’s prompt corrective action regulations. Key components of our performance for the six months ended June 30, 2025 are summarized below.

● Net interest income for the six months ended June 30, 2025 was $38.0 million, an increase of $3.6 million, or 10.4%, compared to $34.4 million for the six months ended June 30, 2024, which was a result of a $5.3 million decrease in interest expense partially offset by a $1.7 million decrease in interest income. We experienced margin expansion as our cost of funds decreased and our yield on interest-earning assets increased.
● During the six months ended June 30, 2025, our net interest margin was 2.95%, compared to 2.61% for the six months ended June 30, 2024.
● For the six months ended June 30, 2025, we recorded a negative provision for credit losses of $3.5 million primarily as a result of a $3.3 million recovery of loans previously charged off following a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. For the six months ended June 30, 2024, we recorded a negative provision for credit losses of $1.8 million primarily due to a decrease in total loans, aging of existing loans, and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates.
● Noninterest income decreased $0.9 million, or 15.7%, to $4.6 million for the six months ended June 30, 2025 compared to $5.5 million for the six months ended June 30, 2024.
● Noninterest expense increased $2.2 million, or 7.0%, to $32.9 million for the six months ended June 30, 2025 compared to $30.8 million for the six months ended June 30, 2024.
● Credit quality metrics improved as nonperforming loans were 0.36% of total loans at June 30, 2025 compared to 0.42% at December 31, 2024.
● Return on average assets increased to 0.80% for the six months ended June 30, 2025, compared to 0.63% for the six months ended June 30, 2024. Return on average equity was 8.66% for the six months ended June 30, 2025, compared to 7.73% for the six months ended June 30, 2024.
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● Book value per common share reached a record high of $26.01 at June 30, 2025 compared to $24.55 at December 31, 2024.
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● Total deposits decreased $7.8 million, or 0.3%, to $2.34 billion at June 30, 2025, compared to $2.35 billion at December 31, 2024. Excluding $47.3 million of brokered demand deposits at December 31, 2024, total deposits increased $39.6 million, or 1.7%, to $2.34 billion at June 30, 2025, compared to $2.30 billion at December 31, 2024. Noninterest-bearing deposits increased $16.3 million, or 3.8%, to $448.5 million at June 30, 2025, compared to $432.1 million at December 31, 2024. As of June 30, 2025, estimated uninsured deposits represented approximately 34% of our total deposits.
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● Total loans decreased $18.7 million, or 0.9%, to $2.11 billion at June 30, 2025, compared to $2.13 billion at December 31, 2024.
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● During the six months ended June 30, 2025, we paid $1.3 million to repurchase 71,057 shares of common stock, compared to $0.3 million to repurchase 16,621 shares of common stock during the six months ended June 30, 2024. We paid $2.1 million in cash dividends on our common stock during six months ended June 30, 2025 compared to $2.0 million during the six months ended June 30, 2024.
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● Accumulated other comprehensive loss decreased $6.7 million, or 13.9%, to $41.6 million at June 30, 2025, compared to $48.4 million at December 31, 2024 primarily due to an increase in the fair value of our AFS securities portfolio.
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Discussion and Analysis of Financial Condition

Loans

General. Loans constitute our most significant asset, comprising 77% and 78% of our total assets at June 30, 2025 and December 31, 2024, respectively. Total loans decreased $18.7 million, or 0.9%, to $2.11 billion at June 30, 2025, compared to $2.13 billion at December 31, 2024. The decrease in loans was primarily the result of loan amortization. Given the high interest rate environment, we are emphasizing origination of high margin loans that promote long-term profitability and proactively exiting credit relationships that do not fit this strategy. Our variable-rate loans as a percentage of total loans increased to 34% at June 30, 2025 compared to 32% at December 31, 2024.

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

June 30, 2025 December 31, 2024
Percentage of Percentage of
Amount Total Loans Amount Total Loans
Construction and development $ 141,654 6.7 % $ 154,553 7.3 %
1-4 Family 387,796 18.4 396,815 18.7
Multifamily 102,569 4.9 84,576 4.0
Farmland 4,519 0.2 6,977 0.3
Commercial real estate
Owner-occupied^(1)^ 462,182 22.0 449,259 21.1
Nonowner-occupied 466,009 22.1 495,289 23.3
Total mortgage loans on real estate 1,564,729 74.3 1,587,469 74.7
Commercial and industrial^(1)^ 531,460 25.2 526,928 24.8
Consumer 10,166 0.5 10,687 0.5
Total loans $ 2,106,355 100 % $ 2,125,084 100 %
^(1)^ The Company’s business lending portfolio consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans.
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At June 30, 2025, the Company’s business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $993.6 million, an increase of $17.5 million, or 1.8%, compared to $976.2 million at December 31, 2024. The increase in the business lending portfolio is primarily driven by organic growth and higher utilization of credit lines, particularly on commercial and industrial relationships.

Nonowner-occupied loans totaled $466.0 million at June 30, 2025, a decrease of $29.3 million, or 5.9%, compared to $495.3 million at December 31, 2024. The decrease in nonowner-occupied loans is primarily due to loan amortization and payoffs that aligned with our continued strategy to optimize and de-risk the mix of the portfolio.

Construction and development loans totaled $141.7 million at June 30, 2025, a decrease of $12.9 million, or 8.3%, compared to $154.6 million at December 31, 2024. The decrease in construction and development loans is primarily due to conversions to permanent loans upon completion of construction.

During the third quarter of 2023 we exited the consumer mortgage loan origination business to transition into shorter duration, higher risk-adjusted return asset classes, in an effort to focus more on our core business and optimize profitability. The consumer mortgage portfolio was approximately $233.1 million and $242.5 million at June 30, 2025 and December 31, 2024, respectively, substantially all of which is included in the 1-4 family category. The remaining loans in the 1-4 family category consisted primarily of second mortgages, home equity loans, home equity lines of credit, and business purpose loans secured by 1-4 family residential real estate.

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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 June 30, 2025 and December 31, 2024, we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above.

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

June 30, 2025 December 31, 2024
Amount Percentage of Total Amount Percentage of Total
Owner-occupied
Retail trade $ 128,588 28 % $ 136,350 30 %
Real estate 63,792 14 67,590 15
Wholesale trade 61,278 13 48,930 11
Healthcare and social assistance 38,151 8 38,950 9
Other services (except public administration) 31,810 7 32,532 7
Accommodation and food services 29,941 6 30,071 7
Manufacturing 20,920 5 16,618 4
Construction 17,592 4 18,276 4
All other^(1)^ 70,110 15 59,942 13
Total owner-occupied $ 462,182 100 % $ 449,259 100 %
Nonowner-occupied
Retail $ 159,653 34 % $ 168,033 34 %
Healthcare 92,052 20 95,641 19
Office 85,301 18 97,261 20
Warehouse 58,607 13 57,684 12
Hotel/motel 30,430 6 30,875 6
All other 39,966 9 45,795 9
Total nonowner-occupied $ 466,009 100 % $ 495,289 100 %
^(1)^ No individual category within “All other” represents more than 4% of total owner-occupied loans.
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The following table sets forth loans outstanding at June 30, 2025 , which, based on remaining scheduled repayments of principal, are due in the periods indicated. Loans with balloon payments and longer amortizations are often repriced and extended beyond the initial maturity when credit conditions remain satisfactory. 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 $ 97,349 $ 38,999 $ 2,595 $ 2,563 $ 148 $ 141,654
1-4 Family 79,079 68,351 20,164 17,662 202,540 387,796
Multifamily 35,356 59,754 6,590 — 869 102,569
Farmland 2,365 2,011 143 — — 4,519
Commercial real estate
Owner-occupied 36,704 192,502 117,658 107,785 7,533 462,182
Nonowner-occupied 98,932 243,499 97,801 25,620 157 466,009
Total mortgage loans on real estate 349,785 605,116 244,951 153,630 211,247 1,564,729
Commercial and industrial 308,006 104,883 62,201 55,227 1,143 531,460
Consumer 3,229 5,325 1,376 152 84 10,166
Total loans $ 661,020 $ 715,324 $ 308,528 $ 209,009 $ 212,474 $ 2,106,355

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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 borrowings. Investment securities represented 14% of our total assets and totaled $397.2 million at June 30, 2025, an increase of $23.4 million, or 6.3%, from $373.8 million at December 31, 2024. The increase in investment securities at June 30, 2025 compared to December 31, 2024 was driven primarily by a $24.4 million increase in residential mortgage-backed securities. Net unrealized losses in our AFS investment securities portfolio decreased to $52.9 million at June 30, 2025 compared to $61.4 million at December 31, 2024 primarily due to lower prevailing market interest rates. For additional information, see Note 3. Investment Securities.

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

June 30, 2025 December 31, 2024
Balance Percentage of Portfolio Balance Percentage of Portfolio
Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 17,173 4.3 % $ 15,707 4.2 %
Obligations of state and political subdivisions 55,334 13.9 56,738 15.2
Corporate bonds 25,006 6.3 27,267 7.3
Residential mortgage-backed securities 235,248 59.2 210,837 56.4
Commercial mortgage-backed securities 64,475 16.3 63,259 16.9
Total $ 397,236 100 % $ 373,808 100 %

The investment portfolio consists of AFS and HTM securities. We do not hold any investments classified as trading. We classify debt securities as HTM if management has the positive intent and ability to hold the securities to maturity. HTM debt securities are stated at amortized cost. Securities not classified as HTM are classified as AFS and are stated at fair value. As of June 30, 2025, AFS securities comprised 90% of our total investment securities.

Due to the nature of the investments, current market prices, and the current interest rate environment, we determined that the declines in the fair values of the AFS and HTM securities portfolio were not attributable to credit losses at June 30, 2025 and December 31, 2024. Accordingly, there was no adjustment made to the amortized cost basis. The carrying values of our AFS securities are adjusted for unrealized gains or losses not attributable to credit losses as valuation allowances, and any gains or losses are reported on an after-tax basis as a component of other comprehensive income (loss).

The table below sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio at June 30, 2025 (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 state and political subdivisions $ — — % $ 2,341 3.75 % $ 2,740 6.80 % $ 34,503 7.25 %
Residential mortgage-backed securities — — — — — — 1,944 3.13
Available for sale: **** **** **** ****
Obligations of the U.S. Treasury and U.S. government agencies and corporations 39 8.16 11,175 5.29 6,147 4.56 — —
Obligations of state and political subdivisions 569 2.39 3,528 2.90 6,482 2.27 7,147 2.68
Corporate bonds 1,550 4.04 10,449 5.38 12,662 3.98 2,249 3.00
Residential mortgage-backed securities — — — — 2,797 2.46 271,796 2.60
Commercial mortgage-backed securities — — 4,413 4.38 2,038 2.92 65,558 3.43
$ 2,158 $ 31,906 $ 32,866 $ 383,197

The maturity of mortgage-backed securities reflects scheduled repayments based upon the contractual maturities of the securities. Weighted average yields on tax-exempt securities are calculated based on amortized cost on a fully tax equivalent basis assuming a federal tax rate of 21%, when applicable.

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Deposits

The following table sets forth the composition of our deposits and the percentage of each deposit type to total deposits at June 30, 2025 and December 31, 2024 (dollars in thousands).

June 30, 2025 December 31, 2024
Amount Percentage of Total Deposits Amount Percentage of Total Deposits
Noninterest-bearing demand deposits $ 448,459 19.2 % $ 432,143 18.4 %
Interest-bearing demand deposits 576,473 24.6 554,777 23.7
Money market deposits 220,961 9.5 191,548 8.2
Brokered demand deposits — — 47,320 2.0
Savings deposits 134,729 5.8 134,879 5.7
Brokered time deposits 256,100 10.9 245,520 10.5
Time deposits 701,463 30.0 739,757 31.5
Total deposits $ 2,338,185 100 % $ 2,345,944 100 %

Total deposits were $2.34 billion at June 30, 2025, a decrease of $7.8 million, or 0.3%, compared to $2.35 billion at December 31, 2024. There were no brokered demand deposits at June 30, 2025, compared to $47.3 million at December 31, 2024. Total deposits, excluding $47.3 million of brokered demand deposits at December 31, 2024, increased $39.6 million, or 1.7%, to $2.34 billion at June 30, 2025, compared to $2.30 billion at December 31, 2024. We utilize brokered demand deposits when pricing is more favorable than other short-term borrowings.

The increase in noninterest-bearing demand deposits, interest-bearing demand deposits, and money market deposits at June 30, 2025 compared to December 31, 2024 is primarily the result of organic growth. We increased rates on our interest-bearing demand deposits during the second quarter of 2025 compared to the second quarter of 2024 to attract and retain lower cost deposits relative to higher-cost short-term borrowings. The decrease in time deposits at June 30, 2025 compared to December 31, 2024 is primarily due to maturities of higher cost time deposits as a result of our strategy to keep duration short and lower rates. Brokered time deposits increased to $256.1 million at June 30, 2025 from $245.5 million at December 31, 2024. We utilize brokered time deposits with laddered maturities, entirely in denominations of less than $250,000, to secure fixed cost funding and reduce short-term borrowings. At June 30, 2025, the balance of brokered time deposits remained below 10% of total assets, and the remaining weighted average duration was approximately four months with a weighted average rate of 4.68%.

At June 30, 2025, our estimated uninsured deposits were $785.7 million, or approximately 34% of total deposits, compared to $737.6 million, or approximately 31% of our total deposits at December 31, 2024. The estimates are based on the same methodologies and assumptions used for our regulatory reporting requirements. The insured deposit data does not reflect an evaluation of all of the account ownership category distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

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Borrowings

At June 30, 2025, total borrowings include securities sold under agreements to repurchase, FHLB advances, subordinated debt issued in 2022, and junior subordinated debentures assumed through acquisitions.

We had $11.0 million of securities sold under agreements to repurchase at June 30, 2025 and $8.4 million at December 31, 2024. Our advances from the FHLB were $70.0 million at June 30, 2025, an increase of $2.8 million, compared to FHLB advances of $67.2 million at December 31, 2024. Based on original maturities, at June 30, 2025, $10.0 million of our FHLB advances were short-term and $60.0 million were long-term, compared to $7.2 million short-term and $60.0 million long-term FHLB advances at December 31, 2024. FHLB advances are used to fund new loan and investment activity that is not funded by deposits or other borrowings.

On March 12, 2023, the Federal Reserve established the BTFP. The BTFP was a one-year program which provided additional liquidity through borrowings for a term of up to one year secured by the pledging of certain qualifying securities and other assets valued at par. Beginning in the second quarter of 2023, we utilized the BTFP to secure fixed rate funding for a one-year term and reduce short-term FHLB advances, which are priced daily. We utilized this source of funding due to its lower rate and the ability to prepay the obligations without penalty. The rates on the borrowings under the BTFP were fixed for one year from the day each borrowing was made. During the fourth quarter of 2023 and again in the first quarter of 2024, we refinanced all of our borrowings under the BTFP with new loans under the BTFP with a one-year term due to more favorable rates. The BTFP ceased making new loans as scheduled on March 11, 2024. During the third quarter of 2024, we began paying down borrowings under the BTFP and repaid all of the remaining borrowings under the BTFP in the fourth quarter of 2024. At June 30, 2025 and December 31, 2024, we had no outstanding borrowings under the BTFP.

Typically, the main source of our short-term borrowings are advances from the FHLB; however, during the six months ended June 30, 2024, our primary source of short-term borrowings were borrowings under the BTFP due to more favorable rates. The rate charged for advances from the FHLB is directly tied to the Federal Reserve’s federal funds target rate. As previously discussed, the Federal Reserve target rate was 5.25% to 5.50% during first half of 2024 compared to 4.25% to 4.50% during first half of 2025.

The average balances and cost of short-term borrowings for the six months ended June 30, 2025 and 2024 are summarized in the table below (dollars in thousands).

Average Balances Average Balances Cost of Short-term Borrowings Cost of Short-term Borrowings
Three months ended June 30, Six months ended June 30, Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024 2025 2024 2025 2024
Federal funds purchased and short-term FHLB advances $ 20,989 $ 11,189 $ 29,731 $ 5,704 4.44 % 5.54 % 4.44 % 5.53 %
Borrowings under BTFP — 229,000 — 229,695 — 4.76 — 4.78
Repurchase agreements 11,596 8,000 11,832 7,108 0.75 0.74 0.75 0.47
Total short-term borrowings $ 32,585 $ 248,189 $ 41,563 $ 242,507 3.13 % 4.68 % 3.39 % 4.67 %

The carrying value of the subordinated debt, which consists entirely of our 2032 Notes, was $16.7 million at June 30, 2025 and December 31, 2024. The $8.8 million and $8.7 million in junior subordinated debt at June 30, 2025 and December 31, 2024, respectively, represent the junior subordinated debentures that we assumed through acquisitions.

For a description of the 2032 Notes, see our Annual Report, Part II. Item 7. “MD&A – Discussion and Analysis of Financial Condition – Borrowings – 2032 Notes” and Note 10 to the financial statements included in such report.

Stockholders’ Equity

Stockholders’ equity was $255.9 million at June 30, 2025, an increase of $14.6 million compared to December 31, 2024. The increase is primarily attributable to $10.8 million of net income for the six months ended June 30, 2025 and a $6.7 million decrease in accumulated other comprehensive loss due to an increase in the fair value of the Bank’s AFS securities portfolio, partially offset by $2.1 million in dividends declared and $1.3 million for share repurchases.

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Results of Operations

Net Interest Income and Net Interest Margin

Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments and rates paid on deposits and other borrowings, the level of nonperforming loans, the amount of noninterest-bearing liabilities supporting earning assets, and the interest rate environment. Net interest margin is the ratio of net interest income to average interest-earning assets.

The primary factors affecting net interest margin are changes in interest rates, competition, and the shape of the interest rate yield curve. The Federal Reserve Board sets various benchmark rates, including the federal funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Reserve increased the federal funds target rate four times during 2023, from 4.25% to 4.50%, to 5.25% to 5.50%. During 2024, beginning in September, the Federal Reserve reduced the federal funds target rate three times by 100 basis points on a cumulative basis to 4.25% to 4.50%. Accordingly, the prevailing federal funds target rate during three and six months ended June 30, 2025 was 100 basis points lower than during the three and six months ended June 30, 2024. For additional discussion, see Certain Events That Affect Period-over-Period Comparability – Changing Inflation and Interest Rates.

Three months ended**June 30, 2025 vs. three months ended June 30, 2024. Net interest income increased 14.2% to $19.6 million for the three months ended June 30, 2025 compared to $17.2 million for the same period in 2024. The increase is primarily due to a lower average balance of short-term borrowings and a decrease in the rates paid on time deposits, partially offset by a lower average balance of loans and an increase in the average balance of and rates paid on interest-bearing demand deposits. Average short-term borrowings decreased by $215.6 million for the three months ended June 30, 2025, as we paid all remaining borrowings under the BTFP in the fourth quarter of 2024. The lower average balance of, and a decrease in rates paid on, short-term borrowings resulted in a $2.6 million decrease in interest expense compared to the same period in 2024. A lower average balance of, and a decrease in rates paid on, time deposits resulted in a $1.6 million decrease in interest expense compared to the same period in 2024. Average loans decreased by $64.5 million for the three months ended June 30, 2025 in accordance with our strategy to optimize the balance sheet, which, in addition to lower loan yields, resulted in a $1.0 million decrease in interest income on loans compared to the same period in 2024. Average interest-bearing demand deposits increased by $136.0 million, which, combined with an increase in rates, resulted in a $1.3 million increase in interest expense in the second quarter of 2025 compared to the same period in 2024. Average noninterest-bearing deposits increased by $22.9 million. Rates paid on interest-bearing liabilities decreased primarily as a result of the overall decrease in prevailing interest rates. Our yield on interest-earning assets was flat as the decrease in the yield on loans was offset by an increase in the yield on the investment securities portfolio.

Interest income was $35.4 million for the three months ended June 30, 2025, compared to $35.8 million for the same period in 2024. Loan interest income made up substantially all of our interest income for the three months ended June 30, 2025 and 2024, although interest on investment securities contributed 10.3% of interest income during the second quarter of 2025 compared to 8.3% during the second quarter of 2024. Of the $0.4 million decrease in interest income, a decrease in interest income of $0.7 million can be attributed primarily to the decrease in the volume of loans, partially offset by an increase of $0.3 million, which can be attributed primarily to an increase in the yield earned on investment securities. The overall yield on interest-earning assets was 5.45% for each the three months ended June 30, 2025 and 2024. The loan portfolio yielded 5.94% and 5.96% for the three months ended June 30, 2025 and June 30, 2024, respectively, while the yield on the investment portfolio was 3.22% for the three months ended June 30, 2025 compared to 2.81% for the three months ended June 30, 2024. The overall yield on interest-earning assets was flat for the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024 and was primarily driven by a 41 basis point increase in the yield on the investment securities portfolio, offset by a two basis point decrease in the yield on the loan portfolio.

Interest expense was $15.7 million for the three months ended June 30, 2025, a decrease of $2.9 million compared to interest expense of $18.6 million for the three months ended June 30, 2024. A decrease in interest expense of $1.9 million resulted from a decrease in the volume of interest-bearing liabilities, primarily short-term borrowings. A decrease of $1.0 million resulted from the decrease in the cost of interest-bearing liabilities, primarily time deposits. Average interest-bearing liabilities decreased by $75.7 million for the three months ended June 30, 2025 compared to the same period in 2024, as average short-term borrowings decreased by $215.6 million while average interest-bearing deposits increased by $125.5 million, primarily due to increases in average interest-bearing demand deposits. We increased rates on our interest-bearing demand deposits during the second quarter of 2025 compared to the second quarter of 2024 to attract and retain lower cost deposits relative to higher cost short-term borrowings. Average time deposits decreased, as we reduced rates on our time deposits during the second quarter of 2025 compared to the second quarter of 2024 due to lower prevailing market interest rates. The cost of deposits decreased 32 basis points to 3.06% for the three months ended June 30, 2025 compared to 3.38% for the three months ended June 30, 2024 primarily as a result of a decrease in the cost of time deposits, partially offset by a higher average balance of, and an increase in the cost of, interest-bearing demand deposits. The cost of interest-bearing liabilities decreased 45 basis points to 3.13% for the three months ended June 30, 2025 compared to 3.58% for the same period in 2024, primarily due to a lower average balance of short-term borrowings and a decrease in the cost of time deposits, partially offset by a higher cost and average balance of interest-bearing demand deposits.

Net interest margin was 3.03% for the three months ended June 30, 2025, an increase of 41 basis points from 2.62% for the three months ended June 30, 2024. The increase in net interest margin was primarily driven by a 45 basis point decrease in the cost of interest-bearing liabilities.

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Average Balances and Yields. The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or paid and the average yield or rate paid on each such category for the three months ended June 30, 2025 and 2024. Averages presented in the table below are daily averages (dollars in thousands).

Three months ended June 30,
2025 2024
**** Interest **** **** Interest ****
Average Income/ **** Average Income/ ****
Balance Expense^(1)^ Yield/ Rate^(1)^ Balance Expense^(1)^ Yield/ Rate^(1)^
Assets **** **** **** ****
Interest-earning assets:
Loans $ 2,104,266 $ 31,140 5.94 % $ 2,168,762 $ 32,161 5.96 %
Securities:
Taxable 402,438 2,961 2.95 403,391 2,766 2.76
Tax-exempt 49,682 665 5.37 23,558 214 3.66
Interest-earning balances with banks 47,909 593 4.97 47,521 649 5.50
Total interest-earning assets 2,604,295 35,359 5.45 2,643,232 35,790 5.45
Cash and due from banks 26,185 25,974
Intangible assets 41,496 42,082
Other assets 95,142 91,439
Allowance for credit losses (26,730 ) (28,935 )
Total assets $ 2,740,388 $ 2,773,792
Liabilities and stockholders’ equity **** **** **** ****
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits $ 794,603 $ 4,396 2.22 % $ 658,594 $ 3,083 1.88 %
Brokered demand deposits 980 11 4.50 — — —
Savings deposits 135,662 350 1.04 128,957 342 1.07
Brokered time deposits 255,374 2,999 4.71 241,777 3,126 5.20
Time deposits 709,855 6,700 3.79 741,657 8,314 4.51
Total interest-bearing deposits 1,896,474 14,456 3.06 1,770,985 14,865 3.38
Short-term borrowings^(2)^ 32,585 254 3.13 248,189 2,886 4.68
Long-term debt 85,487 1,005 4.71 71,122 841 4.76
Total interest-bearing liabilities 2,014,546 15,715 3.13 2,090,296 18,592 3.58
Noninterest-bearing deposits 448,835 425,964
Other liabilities 22,101 29,995
Stockholders’ equity 254,906 227,537
Total liabilities and stockholders’ equity $ 2,740,388 $ 2,773,792
Net interest income/net interest margin $ 19,644 3.03 % $ 17,198 2.62 %
^(1)^ Interest income and net interest margin are expressed as a percentage of average interest-earning assets outstanding for the indicated periods and are not presented on a tax equivalent basis. Interest expense is expressed as a percentage of average interest-bearing liabilities for the indicated periods.
--- ---
^(2)^ For additional information, see Discussion and Analysis of Financial Condition – Borrowings.
Three months ended June 30, 2025 vs.
--- --- --- --- --- --- --- --- --- ---
Three months ended June 30, 2024
Volume Rate Net^(1)^
Interest income: **** **** ****
Loans $ (956 ) $ (65 ) $ (1,021 )
Securities:
Taxable (7 ) 202 195
Tax-exempt 238 213 451
Interest-earning balances with banks 5 (61 ) (56 )
Total interest-earning assets (720 ) 289 (431 )
Interest expense: **** **** ****
Interest-bearing demand deposits 637 676 1,313
Brokered demand deposits 11 — 11
Savings deposits 18 (10 ) 8
Brokered time deposits 176 (303 ) (127 )
Time deposits (357 ) (1,257 ) (1,614 )
Short-term borrowings (2,507 ) (125 ) (2,632 )
Long-term debt 170 (6 ) 164
Total interest-bearing liabilities (1,852 ) (1,025 ) (2,877 )
Change in net interest income $ 1,132 $ 1,314 $ 2,446
^(1)^ Changes in interest due to both volume and rate have been allocated entirely to rate.
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Six months ended**June 30, 2025 vs. six months ended June 30, 2024. Net interest income increased 10.4% to $38.0 million for the six months ended June 30, 2025 compared to $34.4 million for the same period in 2024. The increase is primarily due to a lower average balance of short-term borrowings and a decrease in the rates paid on time deposits, partially offset by a lower average balance of loans and an increase in the average balance of and rates paid on interest-bearing demand deposits. Average short-term borrowings decreased by $200.9 million for the six months ended June 30, 2025, as we paid all remaining borrowings under the BTFP in the fourth quarter of 2024. The lower average balance of, and a decrease in rates paid on, short-term borrowings resulted in a $4.9 million decrease in interest expense compared to the same period in 2024. A lower average balance of, and a decrease in rates paid on, time deposits resulted in a $2.6 million decrease in interest expense compared to the same period in 2024. Average loans decreased by $75.6 million for the six months ended June 30, 2025 in accordance with our strategy to optimize the balance sheet, which, in addition to lower loan yields, resulted in a $2.6 million decrease in interest income on loans compared to the same period in 2024. Average interest-bearing demand deposits increased by $113.6 million, which, combined with an increase in rates, resulted in a $2.2 million increase in interest expense in the first half of 2025 compared to the same period in 2024. Average noninterest-bearing deposits increased by $12.5 million. Rates paid on interest-bearing liabilities decreased primarily as a result of the overall decrease in prevailing interest rates. Our yield on interest-earning assets increased primarily due to an increase in yield on the investment securities portfolio.

Interest income was $69.8 million for the six months ended June 30, 2025, compared to $71.5 million for the same period in 2024. Loan interest income made up substantially all of our interest income for the six months ended June 30, 2025 and 2024, although interest on investment securities contributed 10.0% of interest income during the second quarter of 2025 compared to 8.4% during the second quarter of 2024. Of the $1.7 million decrease in interest income, a decrease in interest income of $1.8 million can be attributed to the decrease in the volume of interest-earnings assets, primarily loans. The overall yield on interest-earning assets was 5.42% and 5.41% for the six months ended June 30, 2025 and 2024, respectively. The loan portfolio yielded 5.91% and 5.93% for the six months ended June 30, 2025 and June 30, 2024, respectively, while the yield on the investment portfolio was 3.16% for the six months ended June 30, 2025 compared to 2.81% for the six months ended June 30, 2024. The increase in the overall yield on interest-earning assets compared to the quarter ended June 30, 2024 was primarily driven by a 35 basis point increase in the yield on the investment securities portfolio, partially offset by a two basis point decrease in the yield on the loan portfolio.

Interest expense was $31.8 million for the six months ended June 30, 2025, a decrease of $5.3 million compared to interest expense of $37.1 million for the six months ended June 30, 2024. A decrease in interest expense of $3.6 million resulted from a decrease in volume of interest-bearing liabilities, primarily short-term borrowings, partially offset by an increase in volume of interest-bearing demand deposits. A decrease in interest expense of $1.7 million resulted from the decrease in the cost of interest-bearing liabilities, primarily time deposits, partially offset by an increase in the cost of interest-bearing demand deposits. Average interest-bearing liabilities decreased by $85.4 million for the six months ended June 30, 2025 compared to the same period in 2024, as average short-term borrowings decreased by $200.9 million while average interest-bearing deposits increased by $103.8 million. We reduced rates on our time deposits during the six months ended June 30, 2025 compared to the to the same period in 2024 due to lower prevailing market interest rates. We increased rates on our interest-bearing demand deposits during the six months ended June 30, 2025 compared to the to the same period in 2024 to attract and retain lower cost deposits relative to higher cost short-term borrowings. The cost of deposits decreased 24 basis points to 3.10% for the six months ended June 30, 2025 compared to 3.34% for the six months ended June 30, 2024 primarily as a result of a lower average balance of time deposits, partially offset by a higher average balance of, and an increase in the cost of, interest-bearing demand deposits. The cost of interest-bearing liabilities decreased 36 basis points to 3.18% for the six months ended June 30, 2025 compared to 3.54% for the same period in 2024, primarily due to a lower average balance of short-term borrowings and a decrease in the cost of time deposits, partially offset by a higher cost and average balance of interest-bearing demand deposits.

Net interest margin was 2.95% for the six months ended June 30, 2025, an increase of 34 basis points from 2.61% for the six months ended June 30, 2024. The increase in net interest margin was primarily driven by a 36 basis point decrease in the cost of interest-bearing liabilities and a one basis point increase in the yield on interest-earning assets.

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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 six months ended June 30, 2025 and 2024. Averages presented in the table below are daily averages (dollars in thousands).

Six months ended June 30,
2025 2024
**** Interest **** **** Interest ****
Average Income/ **** Average Income/ ****
Balance Expense^(1)^ Yield/ Rate^(1)^ Balance Expense^(1)^ Yield/ Rate^(1)^
Assets **** **** **** ****
Interest-earning assets:
Loans $ 2,106,572 $ 61,692 5.91 % $ 2,182,129 $ 64,296 5.93 %
Securities:
Taxable 395,029 5,640 2.88 407,076 5,583 2.76
Tax-exempt 50,218 1,336 5.37 25,260 452 3.60
Interest-earning balances with banks 45,736 1,125 4.96 41,927 1,181 5.67
Total interest-earning assets 2,597,555 69,793 5.42 2,656,392 71,512 5.41
Cash and due from banks 26,155 26,111
Intangible assets 41,563 42,162
Other assets 94,569 92,875
Allowance for credit losses (26,708 ) (29,548 )
Total assets $ 2,733,134 $ 2,787,992
Liabilities and stockholders’ equity **** **** **** ****
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits $ 783,176 $ 8,475 2.18 % $ 669,571 $ 6,249 1.88 %
Brokered demand deposits 4,725 105 4.47 — — —
Savings deposits 134,906 702 1.05 131,905 681 1.04
Brokered time deposits 253,834 6,031 4.79 248,735 6,440 5.21
Time deposits 715,478 13,783 3.88 738,066 16,340 4.45
Total interest-bearing deposits 1,892,119 29,096 3.10 1,788,277 29,710 3.34
Short-term borrowings^(2)^ 41,563 699 3.39 242,507 5,631 4.67
Long-term debt 85,469 2,009 4.74 73,737 1,757 4.79
Total interest-bearing liabilities 2,019,151 31,804 3.18 2,104,521 37,098 3.54
Noninterest-bearing deposits 439,509 427,049
Other liabilities 23,218 28,308
Stockholders’ equity 251,256 228,114
Total liabilities and stockholders’ equity $ 2,733,134 $ 2,787,992
Net interest income/net interest margin $ 37,989 2.95 % $ 34,414 2.61 %
^(1)^ Interest income and net interest margin are expressed as a percentage of average interest-earning assets outstanding for the indicated periods and are not presented on a tax equivalent basis. Interest expense is expressed as a percentage of average interest-bearing liabilities for the indicated periods.
--- ---
^(2)^ For additional information, see Discussion and Analysis of Financial Condition – Borrowings.
Six months ended June 30, 2025 vs.
--- --- --- --- --- --- --- --- --- ---
Six months ended June 30, 2024
Volume Rate Net^(1)^
Interest income: **** **** ****
Loans $ (2,226 ) $ (378 ) $ (2,604 )
Securities:
Taxable (165 ) 222 57
Tax-exempt 447 437 884
Interest-earning balances with banks 107 (163 ) (56 )
Total interest-earning assets (1,837 ) 118 (1,719 )
Interest expense: **** **** ****
Interest-bearing demand deposits 1,061 1,165 2,226
Brokered demand deposits 105 — 105
Savings deposits 16 5 21
Brokered time deposits 132 (541 ) (409 )
Time deposits (501 ) (2,056 ) (2,557 )
Short-term borrowings (4,666 ) (266 ) (4,932 )
Long-term debt 280 (28 ) 252
Total interest-bearing liabilities (3,573 ) (1,721 ) (5,294 )
Change in net interest income $ 1,736 $ 1,839 $ 3,575
^(1)^ Changes in interest due to both volume and rate have been allocated entirely to rate.
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Noninterest Income

Noninterest income includes, among other things, service charges on deposit accounts, gains and losses on sale or disposition of fixed assets, interchange fees, income from BOLI, and changes in the fair value of equity securities. We expect to continue to develop new products that generate noninterest income, and enhance our existing products, in order to diversify our revenue sources.

Three months ended June 30, 2025 vs. three months ended June 30, 2024. Total noninterest income decreased $0.1 million, or 4.5%, to $2.6 million for the three months ended June 30, 2025 compared to $2.8 million for the three months ended June 30, 2024. The decrease in noninterest income was primarily attributable to a $0.7 million decrease in gain on sale of other real estate owned, which was realized in second quarter 2024 on the sale of certain property related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida, partially offset by a $0.4 million decrease in loss on call or sale of investment securities, and a $0.1 million increase in other operating income. The increase in other operating income is primarily attributable to $0.3 million of insurance proceeds received in second quarter 2025 for damages to a property recorded in other real estate owned, also related to the loan relationship described above, and a $0.1 million increase in distributions from other investments, partially offset by a $0.1 million decrease in derivative fee income and a $0.1 million decrease in the change in net asset value of other investments.

Six months ended**June 30, 2025 vs. six months ended June 30, 2024. Total noninterest income decreased $0.9 million, or 15.7%, to $4.6 million for the six months ended June 30, 2025 compared to $5.5 million for the six months ended June 30, 2024. The decrease in noninterest income was primarily attributable to a $0.7 million decrease in gain on sale of other real estate owned, described above, and a $0.4 million decrease in gain on sale or disposition of fixed assets, partially offset by a $0.4 million decrease in loss on call or sale of investment securities. During the first quarter of 2024, we recorded a $0.4 million gain on sale or disposition of fixed assets as a result of the closure of one branch in the Alabama market. A $0.1 million decrease in other operating income is primarily attributable to a $0.2 million decrease in the change in net asset value of other investments and a $0.2 million decrease in derivative fee income, partially offset by $0.3 million of insurance proceeds received for damages to a property recorded in other real estate owned, as described above.

Noninterest Expense

Noninterest expense includes salaries and employee benefits and other costs associated with the conduct of our operations. Our goal is to manage our costs within the framework of our operating strategy of generating consistent, quality earnings.

Three months ended June 30, 2025 vs. three months ended June 30, 2024. Total noninterest expense was $16.7 million for the three months ended June 30, 2025, an increase of $1.2 million, or 7.9%, compared to the same period in 2024. The increase was primarily driven by a $0.7 million increase in salaries and employee benefits, a $0.3 million decrease in gain on early extinguishment of subordinated debt, and a $0.2 million increase in acquisition expense. The increase in salaries and employee benefits is primarily due to investment in people with an emphasis on our Texas markets to remix and strengthen our balance sheet and an increase in health insurance claims. During the second quarter of 2024, we repurchased $5.0 million in principal amount of our 2029 Notes and $2.0 million in principal amount of our 2032 Notes and recognized a gain on early extinguishment of subordinated debt of $0.3 million. The increase in acquisition expense is related to the WFB transaction, discussed above. A $0.1 million increase in other operating expenses resulted primarily from a $0.3 million write down in the second quarter 2025 of other real estate owned related to the loan relationship discussed above and a former branch location.

Six months ended**June 30, 2025 vs. six months ended June 30, 2024. Total noninterest expense was $32.9 million for the six months ended June 30, 2025, an increase of $2.2 million, or 7.0%, compared to the same period in 2024. The increase was primarily driven by a $1.0 million increase in salaries and employee benefits, a $0.5 million decrease in gain on early extinguishment of subordinated debt, a $0.3 million increase in acquisition expense, a $0.2 million increase in professional fees and a $0.2 million increase in other operating expense, partially offset by a $0.2 million decrease in depreciation and amortization. The increase in salaries and employee benefits is primarily due to investment in people with an emphasis on our Texas markets to remix and strengthen our balance sheet and an increase in health insurance claims. During the first half of 2024, we repurchased $5.0 million in principal amount of our 2029 Notes and $3.0 million in principal amount of our 2032 Notes and recognized a gain on early extinguishment of subordinated debt of $0.5 million. The increase in acquisition expense is related to the WFB transaction, discussed above. The increase in other operating expense resulted from a $0.2 million increase in branch services expense and a $0.2 million increase in collection and repossession expenses. During the first quarter of 2025, we recorded a $3.3 million recovery of loans previously charged off as a result of a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. The increase in collection and repossession expenses was primarily due to this property insurance settlement. The decrease in depreciation and amortization is primarily due to the closure of one branch location in the first quarter of 2024.

Income Tax Expense

Income tax expense for the three months ended June 30, 2025 and 2024 was $0.9 million and $0.8 million, respectively. The effective tax rate for the three months ended June 30, 2025 and 2024 was 17.2% and 17.0%, respectively. Income tax expense for the six months ended June 30, 2025 and 2024 was $2.4 million and $2.2 million, respectively. The effective tax rate for the six months ended June 30, 2025 and 2024 was 17.9% and 20.1%, respectively. During the first quarter of 2024, we surrendered approximately $8.4 million of BOLI contracts and reinvested the proceeds in higher yielding policies, which resulted in $0.3 million of income tax expense. The restructuring had an expected earn-back period of just over one year.

For the three and six months ended June 30, 2025, and the three months ended June 30, 2024 the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI. For the six months ended June 30, 2024, the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of BOLI contracts.

On July 4, 2025, the OBBBA, which contains a broad range of tax reform provisions affecting businesses, was signed into law. Since the bill was signed after the close of the quarter, no financial statement impact was reflected in the second quarter of 2025. We are currently evaluating the impact of the OBBBA on the consolidated financial statements and do not believe it will have a material impact. While the details are still under review, we do not expect a significant impact on 2025 income tax expense.

Risk Management

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

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Credit Risk and the Allowance for Credit 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’s loan committee and the full Board. We utilize a ten point risk-rating system, which assigns a risk grade to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction. 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 risk categories, which are consistent with the definitions used in guidance promulgated by federal banking regulators, are as follows.

• Pass (grades 1-6) – Loans not falling into one of the categories below are considered pass. 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.
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• 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.
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• 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.
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• 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.
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At June 30, 2025 and December 31, 2024, there were no loans classified as loss or doubtful, $31.6 million and $32.7 million, respectively, of loans classified as substandard, and $10.4 million and $7.8 million, respectively, of loans classified as special mention.

An independent loan review is conducted annually, whether internally or externally, on at least 40% of commercial loans utilizing a risk-based approach designed to maximize the effectiveness of the review. Internal loan review is independent of the loan underwriting and approval process. In addition, credit analysts periodically review certain commercial loans to identify negative financial trends related to any one borrower, any related groups of borrowers or an industry. All loans not categorized as pass are put on an internal watch list, with quarterly reports to the Board. 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 Credit Losses. We account for the ACL in accordance with ASC 326, which uses the CECL accounting methodology. The CECL methodology requires that lifetime expected credit losses be recorded at the time the financial asset is originated or acquired and be adjusted each period through a provision for credit losses for changes in the expected lifetime credit losses. The ACL was $26.6 million and $26.7 million at June 30, 2025 and December 31, 2024, respectively.

We maintain a separate ACL on unfunded loan commitments, which is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets. The ACL is generally increased by the provision for credit losses and decreased by charge-offs, net of recoveries.

The provision for credit losses for the three months ended June 30, 2025 was primarily due to changes in the economic forecast and loan mix. The negative provision for credit losses for the six months ended June 30, 2025 was primarily due to a $3.3 million recovery during the first quarter of 2025 of loans previously charged off as a result of a property insurance settlement related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. The negative provision for credit losses for the three months ended June 30, 2024 was primarily due to a decrease in total loans and aging of existing loans. The negative provision for credit losses for the six months ended June 30, 2024 was primarily due to a decrease in total loans, aging of existing loans, and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates.

We complete our annual model recalibration process in the first quarter of each year. Our annual review includes peer group analysis, updates to our probability of default and loss-given default models, including prepayment and curtailment assumptions, and qualitative factor scorecard ranges, as needed. The changes resulting from the model recalibration reduced the ACL by approximately $0.5 million during each of the six months ended June 30, 2025 and 2024.

Refer to Note 1. Summary of Significant Accounting Policies – Allowance for Credit Losses in our Annual Report for further discussion of our ACL accounting policy.

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

June 30, 2025 December 31, 2024
Allowance for Credit Losses % of Loans in each Category to Total Loans Allowance for Credit Losses % of Loans in each Category to Total Loans
Mortgage loans on real estate:
Construction and development $ 1,313 6.7 % $ 1,145 7.3 %
1-4 Family 6,434 18.4 5,603 18.7
Multifamily 1,494 4.9 1,185 4.0
Farmland 5 0.2 8 0.3
Commercial real estate 12,012 44.1 11,759 44.4
Commercial and industrial 5,263 25.2 6,933 24.8
Consumer 99 0.5 88 0.5
Total $ 26,620 100 % $ 26,721 100 %

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

June 30, 2025 December 31, 2024
Mortgage loans on real estate:
Construction and development 0.06 % 0.05 %
1-4 Family 0.31 0.26
Multifamily 0.07 0.06
Farmland 0.00 0.00
Commercial real estate 0.57 0.55
Commercial and industrial 0.25 0.33
Consumer 0.00 0.01
Total 1.26 % 1.26 %

As discussed above, the balance in the ACL is principally influenced by the provision for credit losses on loans and net loan loss experience. Additions to the ACL are charged to the provision for credit losses on loans. Losses are charged to the ACL as incurred and recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

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

Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Allowance at beginning of period $ 26,435 $ 29,114 $ 26,721 $ 30,540
Provision for credit losses on loans^(1)^ 172 (298 ) (3,523 ) (1,709 )
Net recoveries (charge-offs) 13 (196 ) 3,422 (211 )
Allowance at end of period $ 26,620 $ 28,620 $ 26,620 $ 28,620
Total loans - period end 2,106,355 2,166,759 2,106,355 2,166,759
Nonaccrual loans - period end 7,453 4,912 7,453 4,912
Key ratios:
Allowance for credit losses to total loans - period end 1.26 % 1.32 % 1.26 % 1.32 %
Allowance for credit losses to nonaccrual loans - period end 357.2 % 582.7 % 357.2 % 582.7 %
Nonaccrual loans to total loans - period end 0.35 % 0.23 % 0.35 % 0.23 %
^(1)^ For the three months ended June 30, 2025, the $0.1 million provision for credit losses on the consolidated statement of income includes a $0.2 million provision for loan losses and a $31,000 negative provision for unfunded loan commitments. For the six months ended June 30, 2025, the $3.5 million negative provision for credit losses on the consolidated statement of income includes a $3.5 million negative provision for loan losses and a $68,000 provision for unfunded loan commitments. For the three months ended June 30, 2024, the $0.4 million negative provision for credit losses on the consolidated statement of income includes a $0.3 million negative provision for loan losses and a $0.1 million negative provision for unfunded loan commitments. For the six months ended June 30, 2024, the $1.8 million negative provision for credit losses on the consolidated statement of income includes a $1.7 million negative provision for loan losses and a $0.1 million negative provision for unfunded loan commitments.
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The ACL to total loans decreased to 1.26% at June 30, 2025 compared to 1.32% at June 30, 2024, and the ACL to nonaccrual loans ratio decreased to 357.2% at June 30, 2025 compared to 582.7% at June 30, 2024. The decrease in the ACL to total loans compared to June 30, 2024 is primarily due to a decrease in total loans, aging of existing loans and an improvement in the economic forecast. The decrease in ACL to nonaccrual loans compared to June 30, 2024 is primarily due to an increase in nonaccrual loans. Nonaccrual loans were $7.5 million, or 0.35% of total loans, at June 30, 2025, an increase of $2.5 million compared to $4.9 million, or 0.23% of total loans, at June 30, 2024. The increase in nonaccrual loans is primarily attributable to one owner-occupied commercial relationship totaling $1.3 million and one 1-4 family loan relationship totaling $0.8 million.

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

Three months ended June 30,
2025 2024
Net Recoveries (Charge-offs) Average Balance Ratio of Net Charge-offs (Recoveries) to Average Loans Net (Charge-offs) Recoveries Average Balance Ratio of Net Charge-offs (Recoveries) to Average Loans
Mortgage loans on real estate:
Construction and development $ — $ 133,104 — % $ (140 ) $ 175,088 0.08 %
1-4 Family 80 391,490 (0.02 ) (103 ) 411,912 0.03
Multifamily — 102,999 — — 103,731 —
Farmland 1 6,242 (0.02 ) — 7,919 —
Commercial real estate 8 943,943 (0.00 ) — 953,441 —
Commercial and industrial (64 ) 516,705 0.01 58 505,231 (0.01 )
Consumer (12 ) 9,783 0.12 (11 ) 11,440 0.10
Total $ 13 $ 2,104,266 (0.00 )% $ (196 ) $ 2,168,762 0.01 %
Six months ended June 30,
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
2025 2024
Net Recoveries (Charge-offs) Average Balance Ratio of Net Charge-offs (Recoveries) to Average Loans Net (Charge-offs) Recoveries Average Balance Ratio of Net Charge-offs (Recoveries) to Average Loans
Mortgage loans on real estate:
Construction and development $ 1 $ 139,907 (0.00 )% $ (131 ) $ 177,459 0.07 %
1-4 Family 65 392,819 (0.02 ) (98 ) 411,484 0.02
Multifamily — 98,392 — — 104,560 —
Farmland 1 6,569 (0.02 ) 36 7,745 (0.46 )
Commercial real estate 3,322 942,653 (0.35 ) — 950,690 —
Commercial and industrial 67 516,103 (0.01 ) 23 518,655 (0.00 )
Consumer (34 ) 10,129 0.34 (41 ) 11,536 0.36
Total $ 3,422 $ 2,106,572 (0.16 )% $ (211 ) $ 2,182,129 0.01 %

Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for credit losses on loans. Net charge-offs include recoveries of amounts previously charged off. For the three months ended June 30, 2025, net recoveries were $13,000, or less than 0.01%, of the average loan balance for the period. For the six months ended June 30, 2025, net recoveries were $3.4 million, or 0.16%, of the average loan balance for the period. Net recoveries during the six months ended June 30, 2025 were primarily the result of a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. Net charge-offs for the three and six months ended June 30, 2024 were $0.2 million, or 0.01%, of the average loan balance for the period. Net charge-offs during the three and six months ended June 30, 2024 were primarily attributable to construction and development and 1-4 family loans.

Management believes the ACL at

June 30, 2025 is sufficient to provide adequate protection against losses in our portfolio. However, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses in connection with our loans. This ACL may prove to be inadequate due to many factors including higher inflation and interest rates than anticipated, higher unemployment than anticipated, other unanticipated adverse changes in the economy, unanticipated effects of the current geopolitical and domestic political conflicts, a public health crisis, or discrete events adversely affecting specific customers or industries. We are monitoring changes and potential changes to U.S. tariff and trade policies that could have an adverse impact on inflation and economic growth, at least in the near term, and which make forecasting difficult. These factors could cause deterioration in credit quality that could lead us to increase our ACL in future periods. Our results of operations and financial condition could be materially adversely affected to the extent that the ACL is insufficient to cover such changes or events.

Nonperforming Assets. 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. Additionally, 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. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period of repayment performance by the borrower. Nonperforming loans were $7.5 million, or 0.36% of total loans, at June 30, 2025, a decrease of $1.3 million compared to $8.8 million, or 0.42% of total loans, at December 31, 2024. The decrease in nonperforming loans compared to December 31, 2024 is mainly attributable to paydowns.

*Loan Modifications to Borrowers Experiencing Financial Difficulty.*Occasionally, we modify loans to borrowers in financial distress by providing certain concessions, such as principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, excluding covenant waivers and modification of contingent acceleration clauses, or a combination of such concessions. When principal forgiveness is provided, the amount of forgiveness is charged-off against the

ACL

. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. During the six months ended June 30, 2025 and 2024*,* we did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

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Other Real Estate Owned. Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure and real property no longer used in the Bank’s business operations. Real estate acquired through foreclosure is initially recorded at fair value at the time of foreclosure, less estimated selling cost, and any related write-down is charged to the ACL. Real property no longer used in the Bank’s business operations is recorded at the lower of its net book value or fair value at the date of transfer to other real estate owned.

For the six months ended June 30, 2025, additions to other real estate owned were $1.0 million, which were driven by transfers of commercial real estate loans to other real estate owned. Other real estate owned with a cost basis of $0.2 million was sold during the three and six months ended June 30, 2025 and 2024, resulting in a gain of $29,000 for the periods. During the three and six months ended June 30, 2025, we recorded $0.3 million of write-downs of other real estate owned related to a property that was part of the loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida and a former branch location based on a third-party appraisal. During the six months ended June 30, 2024, we recorded a $0.2 million write-down of other real estate owned primarily related to a former branch location based on a third-party appraisal. Other real estate owned with a cost basis of $1.1 million was sold during the three and six months ended June 30, 2024 resulting in a gain of $0.7 million for the periods, related to the loan relationship described above.

At June 30, 2025, approximately $2.2 million of loans secured by 1-4 family residential property were in the process of foreclosure.

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

June 30, 2025 December 31, 2024
1-4 Family $ 1,501 $ 1,684
Commercial real estate 4,013 3,358
Commercial and industrial 115 176
Total other real estate owned $ 5,629 $ 5,218

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

Six months ended June 30,
2025 2024
Balance, beginning of period $ 5,218 $ 4,438
Additions 951 230
Sales of other real estate owned (244 ) (1,063 )
Write-downs (296 ) (233 )
Balance, end of period $ 5,629 $ 3,372

Impact of Inflation. Inflation reached a near 40-year high in late 2021 primarily due to effects of the COVID-19 pandemic, and continued rising through June 2022. After June 2022, the rate of inflation generally declined; however, it has remained higher than the Federal Reserve’s target inflation rate of two percent. In response to higher inflation, the Federal Reserve increased the federal funds target rate during 2022 and 2023 as discussed in Certain Events That Affect Period-over-Period Comparability – Changing Inflation and Interest Rates, which generally increased the amount we earn on our interest-earning assets but also increased the amount we pay on our interest-bearing liabilities as discussed throughout this report. We believe that higher rates resulting from inflation and related factors led to constrained loan demand during 2023 and 2024 and through June 30, 2025. When the rate of inflation accelerates, there is an erosion of consumer and customer purchasing power. Accordingly, if the rate of inflation accelerates in the future, this could impact our business by reducing our tolerance for extending credit, and our customer’s desire to obtain credit, or causing us to incur additional provisions for credit losses resulting from a possible increased default rate. Inflation and related higher rates have led and may continue to lead to lower loan re-financings. Inflation has also increased and may continue to increase the costs of goods and services we purchase, including the costs of salaries and benefits. We are monitoring changes and potential changes to U.S. tariff and trade policies that could have an adverse impact on inflation and economic growth, at least in the near term, and which make forecasting difficult.

As noted above, the rate of inflation generally declined after June 2022. In response, from September 2024 to December 2024, the Federal Reserve reduced the federal funds target rate by 100 basis points to 4.25% to 4.50%, where it remained as of August 6, 2025. The inflationary outlook in the U.S. remains uncertain. A decrease in the general level of interest rates may lead to, among other things, prepayments on our loan and mortgage-backed securities portfolios as borrowers refinance their loans at lower rates, lower rates on new loans, lower rates on existing variable rate loans and lower yields on investment securities, which may be offset by lower costs of interest-bearing liabilities. If interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. Significant fluctuations in interest rates makes our business and balance sheet more challenging to manage. For additional information, see Interest Rate Risk below, and Item 1A. “Risk Factors – Risks Related to our Business – Changes in interest rates could have an adverse effect on our profitability” and – “Inflation and rising prices may continue to adversely affect our results of operations and financial condition” in our Annual Report.

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

Net interest income simulation is the Bank’s primary tool for benchmarking near term earnings exposure. Given the ALCO’s objective to understand the potential risk and volatility embedded within the current mix of assets and liabilities, standard rate scenario simulations assume total assets remain static (i.e. no growth). The Bank may also use a standard gap report in its interest rate risk management process. The primary use for the gap report is to provide supporting detailed information to the ALCO’s discussion.

The Bank has particular concerns with the utility of the gap report as a risk management tool because of difficulties in relating gap directly to changes in net interest income. Hence, the income simulation is the key indicator for earnings-at-risk since it expressly measures what the gap report attempts to estimate.

Short term interest rate risk management tactics are decided by the ALCO where risk exposures exist out into the one to two-year horizon. Tactics are formulated and presented to the ALCO for discussion, modification, and/or approval. Such tactics may include asset and liability acquisitions of appropriate maturities in the cash market, loan and deposit product/pricing strategy modification, and derivatives hedging activities to the extent such activity is authorized by the Board.

Since the impact of rate changes due to mismatched balance sheet positions in the short-term can quickly and materially affect the current year’s income statement, they require constant monitoring and management.

Within the gap position that management directs, we attempt to structure our assets and liabilities to minimize the risk of either a rising or falling interest rate environment. We manage our gap position for time horizons of one month, two months, three months, four to six months, seven to twelve months, 13-24 months, 25-36 months, 37-60 months and more than 60 months. The goal of our asset/liability management is for the Bank to maintain a net interest income at risk in an up or down 100 basis point environment at less than (5)%. At June 30, 2025, the Bank was within the policy guidelines for asset/liability management.

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

As of June 30, 2025
Changes in Interest Rates (in basis points) Estimated Increase/Decrease in Net Interest Income^(1)^
+300 (3.3)%
+200 (2.4)%
+100 (0.9)%
-100 1.2%
-200 2.0%
-300 2.7%
^(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.
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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; however, we may need to increase the rates we offer to maintain or increase deposits, which would adversely impact our margins. 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 June 30, 2025 and December 31, 2024, 69% and 68%, respectively, of our total assets were funded by core deposits.

Our investment portfolio is another alternative for meeting our cash flow requirements. Investment securities generate cash flow through interest payments, principal payments and maturities, and they generally have readily available markets that allow for their conversion to cash. At June 30, 2025, 90% of our investment securities portfolio was classified as AFS, and we had gross unrealized losses in our AFS investment securities portfolio of $53.4 million and gross unrealized gains of $0.5 million. The sale of securities in a loss position would cause us to record a loss on sale of investment securities in noninterest income in the period during which the securities were sold. Some securities are pledged to secure certain deposit types or short-term borrowings, such as FHLB advances, which impacts their liquidity. At June 30, 2025, securities with a carrying value of $40.8 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $68.1 million in pledged securities at December 31, 2024.

Other sources available for meeting liquidity needs include advances from the FHLB, repurchase agreements and other borrowings. FHLB advances may be used to meet day to day liquidity needs, particularly if the prevailing interest rate on an FHLB advance compares favorably to the rates that we would be required to pay to attract deposits. At June 30, 2025, the balance of our outstanding advances with the FHLB was $70.0 million, consisting of $10.0 million short-term and $60.0 million long-term advances based on original maturities, an increase of $2.8 million, compared to $67.2 million, consisting of $7.2 million short-term and $60.0 million long-term advances based on original maturities, at December 31, 2024. The total amount of remaining credit available to us from the FHLB at June 30, 2025 was $705.0 million. At June 30, 2025, our FHLB borrowings were collateralized by a blanket pledge of certain loans totaling approximately $954.2 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 investment securities. We had $11.0 million of repurchase agreements outstanding at June 30, 2025 and $8.4 million at December 31, 2024.

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We maintain unsecured lines of credit with First National Bankers Bank and The Independent Bankers Bank totaling $60.0 million. These lines of credit are federal funds lines of credit and are used for overnight borrowing only. The lines of credit mature at various times within the next year. There were no outstanding balances on our unsecured lines of credit at June 30, 2025 and December 31, 2024.

At June 30, 2025, we held $55.2 million of cash and cash equivalents and maintained approximately

$705.0

million of available funding from FHLB advances and maintained $60.0 million in unsecured lines of credit with correspondent banks. Cash and cash equivalents at June 30, 2025 included $17.3 million in advanced proceeds from the sale of our Series A Preferred Stock, which closed on July 1, 2025. Cash and cash equivalents and available funding represent 104% of uninsured deposits of $785.7 million at June 30, 2025.

In addition, at June 30, 2025 and December 31, 2024, we had $17.0 million in aggregate principal amount of subordinated debt outstanding, consisting entirely of our 2032 Notes. For additional information on our 2032 Notes, see our Annual Report, Part II. Item 7. “MD&A – Discussion and Analysis of Financial Condition – Borrowings” and Note 10 to the financial statements included in such report.

Our liquidity strategy is focused on using the least costly funds available to us in the context of our balance sheet composition and interest rate risk position. 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. In recent years, the proportion of our deposits represented by noninterest-bearing deposits has declined primarily due to rising market interest rates as customers have migrated to higher yielding alternatives, although such proportion increased as of the end of second quarter 2025 as rates declined in the latter part of 2024.

At June 30, 2025, we held $256.1 million of brokered time deposits and no brokered demand deposits as defined for federal regulatory purposes. At December 31, 2024, we held $245.5 million of brokered time deposits and $47.3 million of brokered demand deposits as defined for federal regulatory purposes. We utilize brokered time deposits to secure fixed cost funding and reduce short-term borrowings. We utilize brokered demand deposits when pricing is more favorable than other short-term borrowings. We hold QwickRate® deposits, included in our time deposit balances, which we obtain through a qualified network, to address liquidity needs when rates on such deposits compare favorably with deposit rates in our markets. At June 30, 2025, we held $5.9 million of QwickRate® deposits, a decrease of $7.0 million compared to $12.9 million at December 31, 2024.

The following table presents, by type, our funding sources, which consist of total average deposits and borrowed funds, as a percentage of total funds and the total cost of each funding source for the three and six months ended June 30, 2025 and 2024.

Percentage of Total Average Deposits and Borrowed Funds Percentage of Total Average Deposits and Borrowed Funds Cost of Funds Cost of Funds
Three months ended June 30, Six months ended June 30, Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024 2025 2024 2025 2024
Noninterest-bearing demand deposits 18 % 17 % 18 % 17 % — % — % — % — %
Interest-bearing demand deposits 32 26 32 26 2.22 1.88 2.18 1.88
Brokered demand deposits — — — — 4.50 — 4.47 —
Savings accounts 6 5 6 5 1.04 1.07 1.05 1.04
Brokered time deposits 10 10 10 10 4.71 5.20 4.79 5.21
Time deposits 29 29 29 29 3.79 4.51 3.88 4.45
Short-term borrowings 1 10 2 10 3.13 4.68 3.39 4.67
Long-term borrowed funds 4 3 3 3 4.71 4.76 4.74 4.79
Total deposits and borrowed funds 100 % 100 % 100 % 100 % 2.56 % 2.97 % 2.61 % 2.95 %

Capital Resources. Our primary sources of capital include retained earnings, capital obtained through acquisitions, and proceeds from the sale of our capital stock and subordinated debt. We may issue additional capital stock and debt securities from time to time to fund acquisitions and support our organic growth. As noted elsewhere in this report, on July 1, 2025 we completed a private placement of Series A Preferred Stock. We intend to use the net proceeds from the offering to support the acquisition of WFB and for general corporate purposes, including organic growth and other potential acquisitions. The Series A Preferred Stock is intended to qualify as additional Tier 1 capital.

During the six months ended June 30, 2025 and 2024, we paid $2.1 million and $2.0 million in dividends, respectively. We declared dividends on our common stock of $0.215 per share during the six months ended June 30, 2025 compared to dividends of $0.20 per share during the six months ended June 30, 2024. Our Board has authorized a share repurchase program, and at June 30, 2025, we had 424,588 shares of our common stock remaining authorized for repurchase under the program. During the six months ended June 30, 2025, we paid $1.3 million to repurchase 71,057 shares of our common stock, compared to paying $0.3 million to repurchase 16,621 shares of our common stock during the six months ended June 30, 2024. The aggregate purchase price does not include the effect of excise tax incurred on net share repurchases.

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

Capital Tiers^(1)^ Tier 1 Leverage Ratio Common Equity<br> <br>Tier 1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio Ratio of Tangible to Total Assets
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
^(1)^ In order to be well capitalized or adequately capitalized, a bank must satisfy each of the required ratios in the table. In order to be undercapitalized or significantly undercapitalized, a bank would need to fall below just one of the relevant ratio thresholds in the table. In order to be well capitalized, the Bank cannot be subject to any written agreement or order requiring it to maintain a specific level of capital for any capital measure. Pursuant to regulatory capital rules, the Company has made an election not to include unrealized gains and losses in the investment securities portfolio for purposes of calculating “Tier 1” capital and “Tier 2” capital.
--- ---

The Company and the Bank each were in compliance with all regulatory capital requirements at June 30, 2025 and December 31, 2024. The Bank also was considered “well-capitalized” under the OCC’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 for Bank to be Well Capitalized Under Prompt Corrective Action Rules
Amount Ratio Amount Ratio
June 30, 2025 **** ****
Investar Holding Corporation: **** ****
Tier 1 leverage capital $ 266,336 9.64 % $ — — %
Common equity tier 1 capital 256,836 11.28 — —
Tier 1 capital 266,336 11.70 — —
Total capital 309,404 13.59 — —
Investar Bank: **** ****
Tier 1 leverage capital 278,269 10.08 138,005 5.00
Common equity tier 1 capital 278,269 12.24 147,779 6.50
Tier 1 capital 278,269 12.24 181,882 8.00
Total capital 304,620 13.40 227,352 10.00
December 31, 2024 **** ****
Investar Holding Corporation: **** ****
Tier 1 leverage capital $ 258,178 9.27 % $ — — %
Common equity tier 1 capital 248,678 10.84 — —
Tier 1 capital 258,178 11.25 — —
Total capital 301,259 13.13 — —
Investar Bank: **** ****
Tier 1 leverage capital 269,733 9.70 139,092 5.00
Common equity tier 1 capital 269,733 11.77 148,925 6.50
Tier 1 capital 269,733 11.77 183,293 8.00
Total capital 296,117 12.92 229,116 10.00

Off-Balance Sheet Transactions and Lease Obligations

Swap Contracts. The Bank historically has entered into interest rate swap contracts, some of which are forward starting, to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the one-month SOFR associated with the forecasted issuances of one-month fixed rate debt arising from a rollover strategy. An interest rate swap is an agreement whereby one party agrees to pay a fixed rate of interest on a notional principal amount in exchange for receiving a floating rate of interest on the same notional amount for a predetermined period of time, from a second party. At June 30, 2025 and December 31, 2024, we had no current or forward starting interest rate swap agreements, other than interest rate swaps related to customer loans, described below. For additional information, see Note 7. Derivative Financial Instruments.

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The Company also enters into interest rate swap contracts that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under ASC 815, and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. The Company did not recognize any gains or losses in other income resulting from fair value adjustments during the  three and six months ended June 30, 2025 and  2024 . At  June 30, 2025 and  December 31, 2024 , we had notional amounts of $185.6 million and $186.9 million, respectively, in interest rate swap contracts with customers and $185.6 million and $186.9 million, respectively, in offsetting interest rate swap contracts with other financial institutions. At  June 30, 2025 and  December 31, 2024 , the fair value of the swap contracts consisted of gross assets of $13.1 million and $17.2 million, respectively, and gross liabilities of $13.1 million and $17.2 million, respectively, recorded in “Other assets” and “Accrued taxes and other liabilities,” respectively, in the accompanying consolidated balance sheets.

Unfunded Commitments. 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 are also evaluated in a manner similar to the ACL on loans. The reserve for unfunded loan commitments is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets and was $0.1 million and $42,000 at June 30, 2025 and December 31, 2024, respectively.

Loan commitments and standby letters of credit do not necessarily represent future cash requirements, in that while the customer typically has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon in full or at all. Substantially 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):

June 30, 2025 December 31, 2024
Loan commitments $ 358,415 $ 377,301
Standby letters of credit 7,251 7,658

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 June 30, 2025, the Company had unfunded commitments of $0.9 million for its investment in SBIC qualified funds and other investment funds.

For the six months ended June 30, 2025 and for the year ended December 31, 2024, except as disclosed herein and in the Company’s Annual Report, we engaged in no off-balance sheet transactions that we believe are reasonably likely to have a material effect on our financial condition, results of operations, or cash flows.

*Lease Obligations.*The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch operations. The Company’s branch locations operated under lease agreements have all been designated as operating leases. The Company does not lease equipment under operating leases, nor does it have leases designated as finance leases.

The following table presents, as of June 30, 2025, contractually obligated lease payments due under non-cancelable operating leases by payment date (dollars in thousands).

Less than one year $ 457
One to three years 891
Three to five years 652
Over five years 238
Total $ 2,238

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risk as of December 31, 2024 are set forth in the Company’s Annual Report in the section captioned “MD&A – Risk Management.” Please refer to the information in Item 2. “MD&A,” under the heading “Risk Management” in this report for additional information about the Company’s market risk for the six months ended June 30, 2025; except as discussed therein, there have been no material changes in the Company’s market risk since December 31, 2024.

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.

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PART II. OTHER INFORMATION

Item 1A. Risk Factors

For information regarding material risk factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors disclosed in Part I. Item 1A. “Risk Factors” in the Annual Report. Other than as discussed below, there have been no material changes in our risk factors as described in such Annual Report, except for certain heightened risks relating to changing U.S. trade and tariff policies particularly since the end of first quarter 2025, as discussed in “MD&A – Risk Management – Credit Risk and the Allowance for Credit Losses,” which discussion is incorporated by reference herein.

Our Series A Preferred Stock could adversely affect our liquidity, financial condition and holders of our common stock.

On July 1, 2025, we issued 32,500 shares of our newly designated Series A Preferred Stock. The relative preferences, rights and limitations of our Series A Preferred Stock are set forth in our Restated Articles of Incorporation, as amended by the Articles of Amendment filed with the Louisiana Secretary of State, which became effective on June 30, 2025 (as amended, the “Restated Articles”), filed as Exhibit 3.1 to this report. Pursuant to the Restated Articles, subject to certain exceptions, we are prohibited from paying dividends on, or repurchasing or redeeming our common stock, unless full dividends for the Series A Preferred Stock’s most recently completed dividend period have been declared and paid on all outstanding shares of Series A Preferred Stock. In addition, holders of our Series A Preferred Stock have the right to receive distributions or payments upon any liquidation, dissolution or winding up of our business, or upon the occurrence of specified “Reorganization Events,” as defined in the Restated Articles, before any payment may be made to holders of our common stock. These and other provisions related to the Series A Preferred Stock could influence our use of cash, which in turn could reduce the amount of cash flows available for dividends on our common stock, working capital, capital expenditures, growth opportunities (including acquisitions) and general corporate purposes. Our Series A Preferred Stock could also limit our ability to obtain additional financing, which could have an adverse effect on our financial condition and growth strategies.

Further, holders of Series A Preferred Stock have the right, at any time and from time to time, at such holder’s option to convert all or any portion of their Series A Preferred Stock into shares of our common stock at the rate of 47.619 shares of common stock per share of Series A Preferred Stock (subject to certain adjustments) (the “Conversion Rate”), plus cash in lieu of fractional shares of common stock. In addition, subject to certain conditions, on or after July 1, 2028, we will have the right, at our option, from time to time on any dividend payment date, to cause some or all of the Series A Preferred Stock to be converted into shares of our common stock at the Conversion Rate if, for 20 trading days within a period of 30 consecutive trading days, the closing price of our common stock exceeds $26.25 per share (subject to certain adjustments). Any conversion of the Series A Preferred Stock into common stock would dilute the ownership interest of existing holders of our common stock, and any sales in the public market of common stock issuable upon such conversion, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock.

Our issuance of preferred stock in the future could adversely affect holders of our common stock and discourage a takeover.

Our shareholders authorized our Board to issue up to 5,000,000 shares of “blank check” preferred stock without any further action on the part of our shareholders. The Board also has the power, without shareholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. As of the date of this report, 32,500 shares of our newly designated Series A Preferred Stock are outstanding. Holders of our Series A Preferred Stock have certain rights and preferences over our common stock, including but not limited to, payment of dividends, payment upon liquidation, dissolution or winding up, and such shares are convertible into shares of our common stock upon the occurrence of certain events, subject to the terms and conditions of such Series A Preferred Stock. See Note 12. Subsequent Events and “—Our Series A Preferred Stock could adversely affect our liquidity, financial condition and holders of our common stock” above for additional information regarding our Series A Preferred Stock.

If we issue new preferred stock in the future that has preference over our common stock with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock or that are convertible into common stock, the rights of the holders of our common stock or the market price of our common stock could be adversely affected. In addition, the ability of our Board to issue shares of preferred stock without any action on the part of our shareholders may impede a takeover of us and prevent a transaction perceived to be favorable to our shareholders.

The proposed merger with WFB is subject to various closing conditions, which may prevent or delay the consummation of the proposed merger, result in additional expenditures of money and resources, reduce the anticipated benefits of the merger or result in the termination of the Merger Agreement.

We recently announced a Merger Agreement with WFB, the holding company for First National Bank, Wichita Falls, Texas, which provides for the merger of WFB with and into the Company, with the Company as the surviving corporation, and the merger of First National Bank with and into the Bank, with the Bank as the surviving bank. Consummation of the transactions contemplated by the Merger Agreement is subject to various customary conditions, including, without limitation, the approval of the shareholders of each of the Company and WFB; the receipt of certain regulatory approvals; the accuracy of the representations and warranties of the parties and compliance by the parties with their respective covenants and obligations under the Merger Agreement; and the absence of a material adverse change with respect to WFB. Many of the closing conditions are beyond the parties’ control and may prevent, delay or otherwise materially adversely affect the consummation of the proposed merger. We cannot predict with certainty whether or when any of these conditions will be satisfied. Further, regulators may impose conditions on the consummation of the proposed merger that could cause the parties to abandon the proposed merger. If any of these conditions are not satisfied or waived prior to certain dates (as described in the Merger Agreement), it is possible that the Merger Agreement may be terminated and the proposed merger may not be completed. In addition, satisfying these conditions could take longer than initially anticipated. There can be no assurance that the closing conditions will be satisfied or waived in a timely manner or at all. If the proposed merger is not completed or is delayed, there may be adverse consequences depending on the circumstances, including but not limited to, potential negative reactions from investors and the financial markets, and the price of our common stock may decline materially.

The proposed merger with WFB and the integration of the businesses may be more difficult, costly or time-consuming than expected, and we may fail to realize the anticipated benefits of the proposed merger.

The success of the proposed merger, if completed, will depend in part on our ability to realize anticipated benefits of the proposed merger and on our ability to successfully integrate the businesses. The anticipated benefits of the proposed merger may not be realized fully, or at all, or may take longer to realize than expected. For example, WFB’s operations are located in north Texas, which are new markets for our Company. We may experience unanticipated difficulties in integrating WFB’s business, including potential losses of customers and employees, higher than expected integration costs, and inability to maintain and increase market share at new locations in new markets. In addition, we may fail to realize anticipated benefits of the proposed merger, including but not limited to lower than expected revenues and profits, inability to achieve expected cost savings and synergies, or higher than expected liabilities and costs. The pending merger may cause disruptions to our ongoing business and the business of WFB, including difficulties in maintaining relationships with customers, employees or vendors and the diversion of management time on merger-related issues, which could adversely affect our and WFB’s businesses, financial condition and results of operations. We cannot assure you that we will be able to achieve the expected benefits of the proposed merger with WFB.

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

Unregistered Sales of Equity Securities

As previously disclosed, including in a Current Report on Form 8-K filed July 1, 2025, the Company completed a private placement of its Series A Preferred Stock on July 1, 2025.

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Issuer Purchases of Equity Securities

The table below provides 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 June 30, 2025.

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 (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Be Purchased Under the Plans or Programs^(2)^
April 1, 2025 - April 30, 2025 53,164 $ 17.11 29,037 431,616
May 1, 2025 - May 31, 2025 9,056 19.33 7,028 424,588
June 1, 2025 - June 30, 2025 — — — 424,588
62,220 $ 17.44 36,065 424,588
^(1)^ Includes 26,155 shares of common stock surrendered to cover the payroll taxes due upon the vesting of RSUs.
--- ---
^(2)^ The Company has had a stock repurchase program since 2015. As of June 30, 2025, the Company had 424,588 shares remaining available under the program.

Because we are a holding company with no material business activities, our ability to pay dividends is substantially dependent upon the ability of the Bank to transfer funds to us in the form of dividends, loans and advances. The Bank’s ability to pay dividends and make other distributions and payments to us depends upon the Bank’s earnings, financial condition, general economic conditions, compliance with regulatory requirements and other factors. In addition, the Bank’s ability to pay dividends to us is itself subject to various legal, regulatory and other restrictions under federal banking laws that are described in Part I. Item 1. “Business” of our Annual Report.

In addition, as a Louisiana corporation, we are subject to certain restrictions on dividends under the Louisiana Business Corporation Act. Generally, a Louisiana corporation may pay dividends to its shareholders unless, after giving effect to the dividend, either (1) the corporation would not be able to pay its debts as they come due in the usual course of business or (2) the corporation’s total assets are less than the sum of its total liabilities and the amount that would be needed, if the corporation were to be dissolved at the time of the payment of the dividend, to satisfy the preferential rights of shareholders whose preferential rights are superior to those receiving the dividend. In addition, our existing and future debt agreements limit, or may limit, our ability to pay dividends. Under the terms of our 2032 Notes, we are prohibited from paying dividends upon and during the continuance of any Event of Default under such notes. Under the terms of our Series A Preferred Stock, subject to certain exceptions, we are prohibited from paying dividends on, or repurchasing or redeeming our common stock, unless full dividends for the Series A Preferred Stock’s most recently completed dividend period have been declared and paid on all outstanding shares of Series A Preferred Stock. Finally, our ability to pay dividends may be limited on account of the junior subordinated debentures that we assumed through acquisitions. We must make payments on the junior subordinated debentures before any dividends can be paid on our common stock.

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Item 6. Exhibits

Exhibit No. Description of Exhibit
2.1* Agreement and Plan of Merger, dated July 1, 2025, by and among Investar Holding Corporation and Wichita Falls Bancshares, Inc.^(1)^
3.1 Composite Articles of Incorporation of Investar Holding Corporation
3.2 Amended and Restated By-laws of Investar Holding Corporation^(2)^
4.1 Specimen Common Stock Certificate^(3)^
4.2 Specimen certificate representing Series A Non-Cumulative Perpetual Convertible Preferred Stock^(4)^
4.3 Indenture, dated April 6, 2022, by and among Investar Holding Corporation and UMB Bank, National Association, as trustee^(5)^
4.4 Form of 5.125% Fixed-to-Floating Rate Subordinated Note due 2032^(6)^
10.1** Form of Restricted Stock Unit Agreement for Non-Employee Directors - Five Year Vesting^(7)^
10.2 Form of Securities Purchase Agreement, dated June 30, 2025, by and between Investar Holding Corporation and the purchasers set forth therein^(8)^
10.3 Form of Registration Rights Agreement, dated June 30, 2025, by and between Investar Holding Corporation and the purchasers set forth therein^(9)^
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 Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
^(1)^ Filed as exhibit 2.1 to the Current Report on Form 8-K of the Company filed with the SEC on July 1, 2025 and incorporated herein by reference.
--- ---
^(2)^ Filed as exhibit 3.2 to the Registration Statement on Form S-4 of the Company filed with the SEC on October 10, 2017 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.
^(4)^ Filed as exhibit 4.1 to the Current Report on Form 8-K of the Company filed with the SEC on July 1, 2025 and incorporated herein by reference.
^(5)^ Filed as exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on April 7, 2022 and incorporated herein by reference.
^(6)^ Filed as exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on April 7, 2022 and incorporated herein by reference.
^(7)^ Filed as exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company filed with the SEC on May 7, 2025 and incorporated herein by reference.
^(8)^ Filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed with the SEC on July 1, 2025 and incorporated herein by reference.
^(9)^ Filed as exhibit 10.2 to the Current Report on Form 8-K of the Company filed with the SEC on July 1, 2025 and incorporated herein by reference.

* The registrant has omitted schedules and similar attachments to the subject agreement pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish a copy of any omitted schedule or similar attachment to the SEC upon request.

** Management contract or compensatory plan or arrangement.

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 SEC, upon its request, a copy of all long-term debt instruments.

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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: August 6, 2025 /s/ John J. D’Angelo
John J. D’Angelo
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 6, 2025 /s/ John R. Campbell
John R. Campbell
Chief Financial Officer
(Principal Financial Officer)

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ex_847088.htm

Exhibit 3.1

COMPOSITE ARTICLES OF INCORPORATION

OF

INVESTAR HOLDING CORPORATION

(as amended through June 30, 2025)

ARTICLE I.

This corporation shall be known as and its title is declared to be INVESTAR HOLDING CORPORATION, and under this name, style and title, it shall have and enjoy corporate succession perpetually from the date hereof, unless sooner dissolved according to law.

This corporation shall have a corporate seal which may be altered at pleasure, and shall use the same by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced; but failure to affix a seal shall not affect the validity of any instrument.

ARTICLE II.

The parish of domicile of this corporation shall be the Parish of East Baton Rouge, State of Louisiana.

ARTICLE III.

The objects and purposes of this corporation are to carry on, conduct and engage in any lawful activity for which business corporations may be organized, as is now or may hereafter be authorized by law, and to do any and all things incidental thereto.

ARTICLE IV.

The maximum number of shares of capital stock of this corporation that may be issued from time to time by action of the Board of Directors is 45,000,000 shares, of which 40,000,000 shares shall be $1.00 par value common stock and 5,000,000 shares shall be preferred stock, no par value.

Without necessity of action by the shareholders, the authorized shares of capital stock of this corporation may be issued, in whole or in part, on one or more occasions, for such consideration and on such other terms and conditions as may be fixed by the Board of Directors. Upon payment or delivery of the consideration fixed by the Board of Directors for newly issued shares of capital stock, such shares shall be deemed fully paid for. This corporation shall not be obligated to issue certificates for fractional shares.

Shares of preferred stock may be issued from time to time in one or more series, with such designations, voting powers, preferences, dividend or redemption rights or other relative rights or restrictions, limitations or qualifications and as shall be stated and expressed in an amendment to these articles of incorporation adopted by the Board of Directors. Each such series of preferred stock shall be distinctly designated. The designations, voting powers, preferences, dividend or redemption rights or other relative rights or restrictions, limitations or qualifications may differ from those of any and all other series at any time outstanding. The Board of Directors is hereby expressly granted authority to fix the designations, voting powers, preferences, dividend or redemption rights or other relative rights or restrictions, limitations or qualifications, for any and all such series, including without limitation the following: (i) the distinctive designation of and the number of shares of preferred stock that shall constitute such series; provided that such number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (ii) the rate and time at which, and the terms and conditions upon which, dividends, if any, on shares of preferred stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other series of preferred stock or any other class of capital stock and whether such dividends shall be cumulative or noncumulative; (iii) the right, if any, of the holders of preferred stock of such series to convert the same into, or exchange the same, for shares of any other class of capital stock or any series of any class of capital stock and the terms and conditions of such conversion or exchange; (iv) whether shares of preferred stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions upon which, the shares of preferred stock of such series may be redeemed; (v) the rights, if any, of the holders of preferred stock of such series upon the voluntary or involuntary liquidation of this corporation; and (vi) the terms of the sinking fund or redemption or purchase account, if any, to be provided for the preferred stock of such series.

No transfer of shares of capital stock shall be binding upon this corporation unless recorded on its books and records or the books and records of its transfer agent.

1

This corporation may repurchase or redeem its shares of capital stock in a manner and on the conditions permitted and provided under and as may be authorized by the Board of Directors, and any shares repurchased may be reissued or canceled as the Board of Directors may determine.

The shareholders of this corporation shall not have preemptive rights.

ARTICLE IV-A.

6.5% Series A Non-Cumulative Perpetual Convertible Preferred Stock

1. Designation of Series; Number of Shares; Status of Acquired or Converted Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of serial preferred stock designated as the “6.5% Series A Non-Cumulative Perpetual Convertible Preferred Stock”, no par value per share (the “Series A Preferred Stock”). The total number of authorized shares constituting the Series A Preferred Stock will be 32,500 shares. Shares of outstanding Series A Preferred Stock that are purchased or otherwise acquired by the Corporation will be cancelled and will revert to authorized but unissued shares of preferred stock undesignated as to series. Shares of outstanding Series A Preferred Stock that are converted into common stock of the Corporation (the “Common Stock”) in accordance with the Articles of Incorporation will revert to authorized but unissued shares of preferred stock undesignated as to series. The Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series A Preferred Stock, but not below the number of shares of Series A Preferred Stock then outstanding.
2. Definitions. As used herein, the following terms will have the following meanings, unless the context otherwise requires:
--- ---

(a) “Additional Tier 1 Capital” means Additional Tier 1 capital for purposes of capital adequacy regulations of the Federal Reserve Board (or any successor regulatory authority with jurisdiction over bank holding companies), as then in effect and applicable to the Corporation.

(b) “Applicable Procedures” means, with respect to any action with respect to beneficial interests in Series A Preferred Stock issued as a global security, the rules and procedures of the Depositary.

(c) “Applicable Regulatory Approval” is defined in Section 7(g).

(d) “Articles of Incorporation” means the Restated Articles of Incorporation of the Corporation, as amended, restated and/or supplemented from time to time.

(e) “Business Day” means any day except a Saturday, a Sunday or other day on which the Securities and Exchange Commission or banks in the City of New York are authorized or required by law to be closed.

(f) “Buy-In” is defined in Section 10(e)(iv).

(g) “Capital Event” means the receipt by the Corporation of a legal opinion from counsel experienced in such matters to the effect that, as a result of any change, event, occurrence, circumstance or effect occurring on or after the Effective Date, the Series A Preferred Stock does not constitute, or within ninety calendar days of the date of such legal opinion will not constitute, Additional Tier 1 Capital (or such equivalent if the Corporation were subject to such capital requirement).

(h) “Closing Price” of the Common Stock on any date of determination means the NASDAQ Official Closing Price or, if no NASDAQ Official Closing Price is reported, the last reported sale price of the shares of the Common Stock on the NASDAQ Global Market on such date. If the Common Stock is not traded on the NASDAQ Global Market on any date of determination, the Closing Price of the Common Stock on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, or if the Common Stock is not so listed or quoted on a U.S. national or regional securities exchange, the last reported sale price, or if not, the last quoted bid price for the Common Stock in the over-the-counter market as reported by Pink Sheets LLC or similar organization, or, if that sale price or bid price is not available, the market price of the Common Stock on that date as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose. All references herein to the “Closing Price” and “last reported sale price” of the Common Stock on the NASDAQ Global Market will be such closing sale price and last reported sale price as reflected on the website of the NASDAQ Global Market (http://www.nasdaq.com).

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(i) “Common Stock” is defined in Section 1.

(j) “Conversion Agent” means the Person serving as the agent of the Corporation with respect to the conversion of Series A Preferred Stock, and its successors and assigns.

(k) “Conversion Date” means, (i) with respect to a conversion of Series A Preferred Stock pursuant to Section 8, the date on which the last of the items set forth in Section 10(e)(ii) is delivered to the Corporation, and (ii) the Mandatory Conversion Date.

(l) “Conversion Rate” means for each share of Series A Preferred Stock, 47.619 shares of Common Stock, subject to adjustment as set forth herein.

(m) “Conversion Share” or “Conversion Shares” means the shares of Common Stock issued or issuable upon conversion of the Series A Preferred Stock.

(n) “Corporation” as used in this Article IV-A, means Investar Holding Corporation.

(o) “Current Market Price” means, on any date, the average of the daily Closing Price per share of the Common Stock or the closing price of any other securities on each of the five consecutive Trading Days preceding the earlier of the day before the date in question and the day before the Ex-Date with respect to the issuance or distribution giving rise to an adjustment to the Conversion Rate in accordance with Section 11.

(p) “Depositary” means DTC or its nominee or any successor depositary appointed by the Corporation.

(q) “Dividend Parity Stock” is defined in Section 4(f).

(r) “Dividend Payment Date” is defined in Section 4(b).

(s) “Dividend Period” is defined in Section 4(b).

(t) “Dividend Rate” means 6.5%.

(u) “DRS” is defined in Section 10(e)(iii).

(v) “DTC” means The Depository Trust Company and its successors or assigns.

(w) “Effective Date” means the date on which shares of the Series A Preferred Stock are first issued.

(x) “Eligible Market” means the New York Stock Exchange, the NYSE American, The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market.

(y) “Exchange Property” is defined in Section 12(b).

(z) “Ex-Date,” when used with respect to any issuance, dividend or distribution, means the first date on which the Common Stock or other securities trade without the right to receive the issuance, dividend or distribution giving rise to an adjustment to the Conversion Rate in accordance with Section 11.

(aa) “Holder” means the Person in whose name the shares of the Series A Preferred Stock are registered, which may be treated by the Corporation, Transfer Agent, Registrar, paying agent and Conversion Agent as the absolute owner of the shares of Series A Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.

(bb) “Internal Revenue Code” is defined in Section 24(a).

(cc) “Issuer Redemption” is defined in Section 7(c).

(dd) “Issuer Redemption Notice” is defined in Section 7(c).

(ee) “Junior Securities” is defined in Section 3.

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(ff) “Liquidity Conditions” will be satisfied with respect to a mandatory conversion pursuant to Section 9 or an Issuer Redemption pursuant to Section 7 if:

(i) either (x) each Conversion Share issuable upon conversion of the shares of Series A Preferred Stock subject to the applicable mandatory conversion or Issuer Redemption, as the case may be, would be eligible to be offered, sold or otherwise transferred by such Holder of such share pursuant to Rule 144 under the Securities Act (or any successor rule thereto), without any requirements as to volume, manner of sale, availability of current public information (whether or not then satisfied) or notice; or (y) the offer and sale of such Conversion Shares by such Holder is registered pursuant to an effective registration statement under the Securities Act and such registration statement is reasonably expected by the Corporation to remain effective and usable by such Holder to sell such Conversion Shares continuously during the period from, and including, the date the related Notice of Mandatory Conversion or Issuer Redemption Notice, as the case may be, is delivered to such Holder, and including, the thirtieth (30th) calendar day thereafter;
(ii) each Conversion Share issuable upon conversion of the shares of Series A Preferred Stock subject to the applicable mandatory conversion or Issuer Redemption, as the case may be, (x) will, when sold or otherwise transferred pursuant to, in the case of clause (i)(x) above, Rule 144, or, in the case of clause (i)(y) above, the registration statement referred to in such clause) be admitted for book-entry settlement through the Depositary with an “unrestricted” CUSIP number, (y) will not be represented by any certificate that bears a legend referring to transfer restrictions under the Securities Act or other securities laws; and (iii) will, when issued, be listed and admitted for trading, without suspension or material limitation on trading, on an Eligible Market);
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(iii) each Conversion Share issuable upon conversion of the shares of Series A Preferred Stock subject to the applicable mandatory conversion or Issuer Redemption, as the case may be, may be issued in full without violating Sections 9(d) or 9(e) hereof and without violating the rules or regulations of the applicable Eligible Market on which the Common Stock is then listed for trading;
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(iv) the Corporation has not received any written threat or notice of delisting or suspension by the applicable Eligible Market with a reasonable prospect of delisting, after giving effect to all applicable notice and appeal periods; and (ii) no such delisting or suspension is reasonably likely to occur or is pending based on the Corporation falling below the minimum listing maintenance requirements of such exchange;
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(v) the Corporation has not delivered a notice pursuant to Section 12(e) with respect to an anticipated Reorganization Event; and
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(vi) the Corporation shall not have provided such Holder any information that, at any time during the period from the date the applicable Notice of Mandatory Conversion is delivered to such Holder through and including the related Mandatory Conversion Date, or, from the date the applicable Issuer Redemption Notice is delivered to such Holder through and including the related date such Issuer Redemption is consummated, as the case may be, constitutes material non-public information under the U.S. federal securities laws regarding the Company.
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(gg) “Mandatory Conversion Date” is defined in Section 9(a).

(hh) “Mandatory Conversion Price Condition” is defined in Section 9(a).

(ii) “Notice of Mandatory Conversion” is defined in Section 9(c).

(jj) “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

(kk) “Record Date” is defined in Section 4(b).

(ll) “Registrar” means the Person acting in its capacity as registrar for the Series A Preferred Stock, and its successors and assigns.

(mm) “Reorganization Event” is defined in Section 12(a).

(nn) “Securities Act” means the Securities Act of 1933, as amended.

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(oo) “Series A Preferred Stock” is defined in Section 1.

(pp) “Trading Day” means a day on which the shares of Common Stock:

(i) are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business; and
(ii) have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.
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(qq) “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, for the applicable Eligible Market with respect to the Common Stock that is in effect on the date of delivery of an applicable conversion notice, which as of the Effective Date was “T+1.”

(rr) “Transfer Agent” means the Person serving as the agent of the Corporation with respect to the registration of transfer of Series A Preferred Stock, and its successors and assigns.

(ss) “USRPHC Asset Base” is defined in Section 24(b).

(tt) “Voting Security” has the meaning set forth in 12 C.F.R. § 225.2(q) or any successor provision thereto.

3. Ranking. The Series A Preferred Stock will rank, with respect to the payment of dividends and distributions upon liquidation, dissolution or winding-up, whether voluntary or involuntary, (1) on a parity with each class or series of preferred stock or capital stock the Corporation may issue in the future the terms of which expressly provide that such class or series will rank on a parity with the Series A Preferred Stock as to dividend rights and rights on liquidation, winding up and dissolution of the Corporation, and (2) senior to the Common Stock and each other class or series of preferred stock or capital stock the Corporation may issue in the future the terms of which do not expressly provide that such class or series will rank on a parity with or senior to the Series A Preferred Stock as to dividend rights and/or rights on liquidation, winding-up and dissolution of the Corporation (the “Junior Securities”).
4. Dividends.
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(a) From and after the Effective Date, Holders will be entitled to receive, when, as and if authorized by the Board of Directors and declared by the Corporation, out of legally available funds, on a non-cumulative basis, cash dividends by wire transfer of immediately available funds in the amount determined as set forth in Section 4(c), and no more.

(b) Subject to Section 4(a) and Section 4(c), dividends will be payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year (each such date, a “Dividend Payment Date”) commencing on October 1, 2025. Each dividend will be payable to Holders of record as they appear in the records of the Corporation at the close of business on the fifteenth day of the month immediately preceding the relevant Dividend Payment Date (each, a “Record Date”). Each period from and including a Dividend Payment Date (or, with respect to the initial Dividend Payment Date following the Effective Date, the Effective Date) to but excluding the following Dividend Payment Date is herein referred to as a “Dividend Period.”

(c) Dividends, if, when and as authorized by the Board of Directors and declared by the Corporation, will be, for each outstanding share of Series A Preferred Stock, at an annual rate equal to the Dividend Rate on the liquidation preference of $1,000 per share, without regard to, or accumulation of, any undeclared dividends. Dividends payable for a Dividend Period will be computed on the basis of a 360-day year of twelve 30-day months. If a scheduled Dividend Payment Date falls on a day that is not a Business Day, the dividend will be paid on the next Business Day as if it were paid on the scheduled Dividend Payment Date, and no interest or other amount will accrue on the dividend so payable for the period from and after that Dividend Payment Date to the date the dividend is paid. No interest or sum of money in lieu of interest will be paid on any dividend payment on a Series A Preferred Stock paid later than the scheduled Dividend Payment Date.

(d) Dividends on the Series A Preferred Stock are non-cumulative. If the Board of Directors does not authorize and the Corporation does not declare a dividend on the Series A Preferred Stock or if the Board of Directors authorizes and the Corporation declares less than a full dividend in respect of any Dividend Period, the Holders will have no right to receive any dividend or a full dividend, as the case may be, for such Dividend Period, and the Corporation will have no obligation to pay a dividend or to pay full dividends for such Dividend Period, whether or not dividends are authorized, declared and paid for any future Dividend Period with respect to the Series A Preferred Stock or the Common Stock or any other class or series of the Corporation’s preferred stock. No interest, or sum of money in lieu of interest, will be payable in respect of any dividend payment or failure to make any dividend payment.

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(e) So long as any share of Series A Preferred Stock remains outstanding, no dividend will be declared or paid on the Common Stock or any other shares of Junior Securities (other than any dividend in connection with the implementation of a shareholders’ rights plan or the redemption or repurchase of any rights under any such plan), unless full dividends for the last preceding Dividend Period on all outstanding shares of Series A Preferred Stock have been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The Corporation and its subsidiaries will not purchase, redeem or otherwise acquire, directly or indirectly, for consideration any shares of Common Stock or other Junior Securities (other than (i) as a result of a reclassification of such Junior Securities for or into other Junior Securities, (ii) the exchange or conversion of one share of such Junior Securities for or into another share of such Junior Securities, (iii) purchases, redemptions or other acquisitions of shares of Junior Securities in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants or (iv) the purchase of fractional interests in shares of Junior Securities pursuant to the conversion or exchange provisions of such securities or the security being converted or exchanged) nor will the Corporation pay or make available any monies for a sinking fund for the redemption of any shares of Common Stock or any other shares of Junior Securities during a Dividend Period, unless the full dividends for the most recently completed Dividend Period on all outstanding shares of Series A Preferred Stock have been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside).

(f) When dividends are not paid in full upon the shares of Series A Preferred Stock and other equity securities ranking on a parity with the Series A Preferred Stock as to payment of dividends (“Dividend Parity Stock”), all dividends declared and unpaid for payment on a dividend payment date with respect to the Series A Preferred Stock and the Dividend Parity Stock will be shared ratably by the Holders and holders of any Dividend Parity Stock, in proportion to the respective amounts of the declared and unpaid dividends relating to the current dividend period. To the extent a dividend period with respect to any Dividend Parity Stock coincides with more than one Dividend Period with respect to the Series A Preferred Stock, for purposes of the immediately preceding sentence the Board of Directors will treat such dividend period as two or more consecutive dividend periods, none of which coincides with more than one Dividend Period with respect to the Series A Preferred Stock, or will treat such dividend period(s) with respect to any Dividend Parity Stock and Dividend Period(s) with respect to the Series A Preferred Stock for purposes of the immediately preceding sentence in any other manner that it deems to be fair and equitable in order to achieve ratable payments of dividends on such Dividend Parity Stock and the Series A Preferred Stock. To the extent a Dividend Period with respect to the Series A Preferred Stock coincides with more than one dividend period with respect to any Dividend Parity Stock, for purposes of the first sentence of this paragraph the Board of Directors will treat such Dividend Period as two or more consecutive Dividend Periods, none of which coincides with more than one dividend period with respect to such Dividend Parity Stock, or will treat such Dividend Period(s) with respect to the Series A Preferred Stock and dividend period(s) with respect to any Dividend Parity Stock for purposes of the first sentence of this paragraph in any other manner that it deems to be fair and equitable in order to achieve ratable payments of dividends on the Series A Preferred Stock and such Dividend Parity Stock. The term “dividend period” as used in this paragraph means such dividend periods as are provided for in the terms of any Dividend Parity Stock and, in the case of shares of Series A Preferred Stock, Dividend Periods applicable to shares of Series A Preferred Stock; and the term “dividend payment dates” as used in this paragraph means such dividend payment dates as are provided for in the terms of any Dividend Parity Stock and, in the case of shares of Series A Preferred Stock, Dividend Payment Dates applicable to shares of Series A Preferred Stock.

(g) Subject to the foregoing, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors (or a duly authorized committee of the Board) may be declared and paid on any securities, including Common Stock, any other Junior Securities and any Dividend Parity Stock, from time to time out of any funds legally available for such payment.

(h) Payments of cash dividends on the Series A Preferred Stock will be delivered to the Holder or, in the case of global certificates, through a book-entry transfer through DTC or any successor Depositary.

(i) If the Conversion Date applicable to any conversion of shares of Series A Preferred Stock is on or prior to the Record Date for any declared dividend for the Dividend Period with respect to such shares, such Holder will not have the right to receive any declared dividends on such shares for that Dividend Period. If the Conversion Date applicable to any conversion of shares of Series A Preferred Stock is after the Record Date for any declared dividends with respect to such shares and prior to the Dividend Payment Date, such Holder will receive that dividend on the relevant Dividend Payment Date if such Holder was the Holder of record on the Record Date for that dividend.

5. Liquidation.

(a) In the event the Corporation voluntarily or involuntarily liquidates, dissolves or winds up, each Holder at the time thereof will be entitled to receive cash liquidating distributions in an amount equal to the greater of (i) the liquidation preference of $1,000 per share of Series A Preferred Stock, plus all declared but unpaid dividends thereon, without regard to, or accumulation of, any undeclared dividends, and (ii) the amount that such Holder would have received in respect of the Common Stock issuable upon conversion of Series A Preferred Stock held thereby had such Holder converted such share of Series A Preferred Stock immediately prior to such time, in each case out of assets or proceeds thereof legally available for distribution to the Corporation’s stockholders, before any distribution of assets or proceeds is made to or set aside for the holders of the Common Stock or any other Junior Securities. After payment of the full amount of such liquidating distributions, the Holders will not be entitled to any further participation in any distribution of assets by, and will have no right or claim to any remaining assets or proceeds of, the Corporation.

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(b) In the event the assets or proceeds of the Corporation available for distribution to stockholders upon any liquidation, dissolution or winding-up of the affairs of the Corporation, whether voluntary or involuntary, will be insufficient to pay in full the amounts payable with respect to all outstanding shares of the Series A Preferred Stock and the corresponding amounts payable on all outstanding securities of the Corporation ranking equally with the Series A Preferred Stock upon liquidation, the amounts paid to the Holders and to the holders of all such other securities ranking equally with the Series A Preferred Stock upon liquidation will share ratably in any distribution of assets or proceeds of the Corporation in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled, and prior to the distribution of assets or proceeds is made to, or set aside for, the holders of the Common Stock or any other Junior Securities.

(c) The Corporation’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into the Corporation, or the sale of all or substantially all of the Corporation’s property or business, will not constitute its liquidation, dissolution or winding up.

(d) In determining whether a distribution (other than upon voluntary or involuntary liquidation) on the Series A Preferred Stock, by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise, is permitted under applicable law, amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of shares of Series A Preferred Stock will not be added to the Corporation’s total liabilities.

6. Maturity. The Series A Preferred Stock will be perpetual unless converted in accordance with the Articles of Incorporation.
7. Redemptions.
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(a) The Corporation, at the option of the Board of Directors or any duly authorized committee of the Board of Directors, may redeem, from time to time, out of assets legally available therefor, in whole or in part, the shares of Series A Preferred Stock then outstanding on any Dividend Payment Date (and, for the avoidance of doubt, following the payment of any dividend payable on such Dividend Payment Date) occurring on or after the fifth anniversary of the Effective Date. The redemption price for shares of Series A Preferred Stock redeemed pursuant to the preceding sentence will be equal to $1,000 per share, plus all declared, but unpaid dividends thereon, without regard to, or accumulation of, any undeclared dividends.

(b) In addition and notwithstanding the above, the Corporation, at the option of the Board of Directors or any duly authorized committee of the Board of Directors, may redeem out of assets legally available therefor, in whole but not in part, the shares of Series A Preferred Stock then outstanding at any time following a Capital Event. The redemption price for shares of Series A Preferred Stock redeemed pursuant to this Section 7(b) will be equal to $1,000 per share, plus all declared, but unpaid dividends thereon, without regard to, or accumulation of, any undeclared dividends.

(c) Any redemption made by the Corporation under this Section 7 (the “Issuer Redemption”) will be made by providing thirty calendar days’ advance written notice (the “Issuer Redemption Notice”) to each Holder notifying such Holders of the redemption to be effected, specifying the number of shares of Series A Preferred Stock to be redeemed from such Holder, specifying the Dividend Payment Date on which such redemption will occur, the redemption price, the place at which payment may be obtained and calling upon such Holder to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares to be redeemed, if applicable, or such other or additional information required by DTC pursuant to its Applicable Procedures.

(d) Upon receipt of an Issuer Redemption Notice, a Holder of shares of Series A Preferred Stock may elect to convert such shares into shares of Common Stock in accordance with Section 8 hereof at any time prior to such Issuer Redemption.

(e) The Corporation may not deliver to a Holder an Issuer Redemption Notice unless on or prior to the date of delivery of such Issuer Redemption Notice, the Corporation will have segregated on the books and records of the Corporation an amount of cash sufficient to pay all amounts to which the Holders of shares of Series A Preferred Stock are entitled upon such redemption pursuant to this Section 7. Any Issuer Redemption Notice delivered will be irrevocable. Notwithstanding the foregoing, the Corporation will not exercise its right to effect Issuer Redemption pursuant to this Section 7, or otherwise send an Issuer Redemption Notice, with respect to any Series A Preferred Stock unless the Liquidity Conditions are satisfied (or waived in writing by such Holder) with respect to such Issuer Redemption.

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(f) The price per share of Series A Preferred Stock required to be paid by the Corporation under this Section 7 will be paid in cash to the Holders whose Series A Preferred Stock is being redeemed on the date of such Issuer Redemption. The redemption price for any shares of Series A Preferred Stock will be payable against surrender of the certificate(s), if any, evidencing such shares to the Corporation.

(g) Any redemption of the Series A Preferred Stock will be subject to receipt by the Corporation of any required prior approval of the Board of Governors of the Federal Reserve System or other applicable governmental authority (“Applicable Regulatory Approval”) and to the satisfaction of any conditions set forth in the capital guidelines or regulations of the Board of Governors of the Federal Reserve System applicable to redemption of the Series A Preferred Stock.

(h) The Series A Preferred Stock will not be subject to redemption at the option of the Holder.

8. Conversion at the Option of the Holder.

(a) Each Holder will have the right, at any time and from time to time after the Effective Date, at such Holder’s option, to convert all or any portion of such Holder’s Series A Preferred Stock into shares of Common Stock at the Conversion Rate per share of Series A Preferred Stock (subject to the conversion procedures contained in Section 10) plus cash in lieu of fractional shares as provided herein.

(b) Notwithstanding anything to the contrary in this Article IV-A, the Corporation will not be required to effect a conversion under this Section 8 with respect to shares of the Series A Preferred Stock of any Holder the conversion of which would be subject to any Applicable Regulatory Approval unless, with respect to such Holder, the Applicable Regulatory Approval has been obtained and remains in effect.

(c) Notwithstanding any other provision of this Article IV-A, the Corporation will not be required to effect a conversion under this Section 8 with respect to shares of Series A Preferred Stock held by any Holder that would result in such Holder owning, together with its affiliates, more than 9.9% of the outstanding shares of Common Stock (or of any class of Voting Securities issued by the Corporation) after giving effect to such conversion, calculated in accordance with the regulations of the Board of Governors of the Federal Reserve System at 12 C.F.R. § 225.9(a). Those shares of Series A Preferred Stock that are not convertible under the preceding sentence will remain outstanding unless or until such shares may be converted or otherwise redeemed in accordance herewith.

9. Mandatory Conversion at the Corporation’s Option.

(a) On or after July 1, 2028, the Corporation will have the right, at its option, from time to time on any Dividend Payment Date (and, for the avoidance of doubt, following the payment of any dividend payable on such Dividend Payment Date) (a “Mandatory Conversion Date”), to cause some or all of the Series A Preferred Stock to be converted into shares of Common Stock at the Conversion Rate if, for twenty Trading Days within the period of thirty consecutive Trading Days (including the last Trading Day of such period), ending on the Trading Day preceding the date the Corporation delivers a Notice of Mandatory Conversion, the Closing Price of the Common Stock exceeds $26.25 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction relating to the Common Stock occurring after the Effective Date) (the “Mandatory Conversion Price Condition”). Notwithstanding the foregoing, the Corporation will not exercise its right to effect a mandatory conversion pursuant to this Section 9, or otherwise send a Notice of Mandatory Conversion, with respect to any Series A Preferred Stock unless the Liquidity Conditions and the Mandatory Conversion Price Condition are satisfied (or waived in writing by such Holder) with respect to such mandatory conversion.

(b) If the Corporation elects to cause less than all of the shares of Series A Preferred Stock to be converted under Section 9(a), the Conversion Agent will select the Series A Preferred Stock to be converted by lot, on a pro rata basis or by another method the Conversion Agent considers fair and appropriate, including any method required by DTC or any successor Depositary. If the Conversion Agent selects a portion of a Holder’s Series A Preferred Stock for partial mandatory conversion and such Holder also elects or has elected to convert a portion of its shares of Series A Preferred Stock, the mandatory converted portion will first be deemed to be from the portion selected for optional conversion under Section 8.

(c) In order to exercise the mandatory conversion right described in this Section 9, the Corporation will provide written notice of such conversion to each Holder (such notice, a “Notice of Mandatory Conversion”). In addition to any information required by applicable law or regulation, the Notice of Mandatory Conversion will state, as appropriate:

(i)    the Mandatory Conversion Date;

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(ii)    the number of shares of Common Stock to be issued upon conversion of each share of Series A Preferred Stock;

(iii)    the number of shares of Series A Preferred Stock to be converted;

(iv)    that such Notice of Mandatory Conversion shall be deemed automatically rescinded with respect to such Holder if any of the Liquidity Conditions and/or the Mandatory Conversion Price Condition are not satisfied (or waived in writing by such Holder) at any time prior to the applicable Mandatory Conversion Date; and

(v)    any other or additional information required by DTC pursuant to its Applicable Procedures.

(d) Notwithstanding anything to the contrary in this Article IV-A, no Holder will be required to effect a conversion under this Section 9 with respect to shares of the Series A Preferred Stock of any Holder the conversion of which would be subject to any Applicable Regulatory Approval unless, with respect to such Holder, the Applicable Regulatory Approval has been obtained and remains in effect.

(e) Notwithstanding any other provision of this Article IV-A, no Holder will be required to effect a conversion under this Section 9 with respect to shares of Series A Preferred Stock held by any Holder that would result in such Holder owning, together with its affiliates, more than 9.9% of the outstanding shares of Common Stock (or of any class of Voting Securities issued by the Corporation) after giving effect to such conversion, calculated in accordance with the regulations of the Board of Governors of the Federal Reserve System at 12 C.F.R. § 225.9(a). Those shares of Series A Preferred Stock that are not convertible under the preceding sentence will remain outstanding unless or until such shares may be converted or otherwise redeemed in accordance herewith.

10. Conversion Procedures.

(a) Effective immediately prior to the close of business on the Conversion Date, the shares of Series A Preferred Stock subject to conversion will cease to be outstanding, and dividends will no longer be authorized and declared on any converted shares of Series A Preferred Stock, subject to the right of Holders to receive any authorized, declared and unpaid dividends on such shares and any other payments to which they are otherwise entitled hereunder.

(b) No allowance or adjustment, except pursuant to Section 11, will be made in respect of dividends payable to holders of the Common Stock of record as of any date prior to the close of business on the Conversion Date.

(c) Prior to the close of business on the Conversion Date, shares of Common Stock issuable upon conversion of, or other securities issuable upon conversion of, any shares of Series A Preferred Stock will not be deemed outstanding for any purpose, and Holders will have no rights with respect to the Common Stock or other securities issuable upon conversion (including voting rights, rights to respond to tender offers for the Common Stock or other securities issuable upon conversion and rights to receive any dividends or other distributions on the Common Stock or other securities issuable upon conversion) by virtue of holding shares of Series A Preferred Stock.

(d) The Person or Persons entitled to receive the Common Stock and/or cash, securities or other property issuable upon conversion of Series A Preferred Stock will be treated for all purposes as the record holder(s) of such shares of Common Stock and/or securities as of the close of business on the Conversion Date. In the event that a Holder will not by written notice designate the name in which shares of Common Stock and/or cash, securities or other property (including payments of cash in lieu of fractional shares) to be issued or paid upon conversion of shares of Series A Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Corporation will be entitled to register and deliver such shares, and make such payment, in the name of the Holder and in the manner shown on the records of the Corporation or, in the case of global certificates or uncertificated shares, through book-entry transfer through the Depositary.

(e) Conversion into shares of Common Stock will occur as follows:

(i)    On the Mandatory Conversion Date, shares of Common Stock will be issued to Holders or their designee upon presentation and surrender of the certificate evidencing the Series A Preferred Stock to the Conversion Agent, if shares of the Series A Preferred Stock are held in certificated form, and, if required, the furnishing of appropriate endorsements and transfer documents and the payment of all transfer and similar taxes. If a Holder’s interest is a beneficial interest in a global certificate representing Series A Preferred Stock, a book-entry transfer through the Depositary will be made by the Conversion Agent upon compliance with the Applicable Procedures for converting a beneficial interest in a global security.

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(ii)    On the date of any conversion at the option of a Holder pursuant to Section 8 or Section 12, if a Holder’s interest is in certificated form, a Holder must do each of the following in order to convert:

(A) complete and manually sign the conversion notice provided by the Conversion Agent, or a facsimile or email of the conversion notice, and deliver such irrevocable notice to the Conversion Agent;
(B) surrender the shares of Series A Preferred Stock to the Conversion Agent;
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(C) if required, furnish appropriate endorsements and transfer documents; and
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(D) if required, pay all transfer or similar taxes.
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If a Holder’s interest is a beneficial interest in a global certificate representing Series A Preferred Stock, in order to convert, such Holder must comply with paragraphs (C) and (D) of this clause (ii) and comply with the Applicable Procedures for converting a beneficial interest in a global security. The date on which a Holder complies with the procedures in this clause (ii), in the reasonable discretion of the Conversion Agent, will be deemed the “Conversion Date” with respect to a conversion at the option of the Holder.

(iii)    The Conversion Agent will, on a Holder’s behalf, convert the Series A Preferred Stock into shares of Common Stock, in accordance with the terms of the notice delivered by such Holder described in Section 10(e)(ii). The Corporation shall, or shall cause its Conversion Agent to, promptly (but in no event later than the number of Trading Days comprising the Standard Settlement Period following the applicable Conversion Date), upon the request of such Holder, cause the Conversion Agent to credit such aggregate number of shares of Common Stock specified by such Holder in the applicable conversion notice and to which the Holder is entitled pursuant to such conversion to (i) such Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal At Custodian system or (ii) in book-entry form via a direct registration system (“DRS”) maintained by or on behalf of the Conversion Agent, in each case, so long as either (A) there is an effective registration statement permitting the issuance of the Conversion Shares to or the resale of such Conversion Shares by such Holder or (B) the Conversion Shares are eligible for resale by such Holder without volume or manner-of-sale restrictions pursuant to Rule 144 promulgated under the Securities Act. If (A) and (B) above are not true, the Corporation shall cause the Conversion Agent to either (i) record the Conversion Shares in the name of such Holder or its designee on the certificates reflecting the Conversion Shares with an appropriate legend regarding restriction on transferability, which shall be issued and dispatched by overnight courier to the address as specified in the applicable conversion notice, and on the Corporation’s share register or (ii) issue such Conversion Shares in the name of such Holder or its designee in restricted book-entry form in the Corporation’s share register. Such Holder, or any Person so designated by such Holder to receive Conversion Shares, shall be deemed to have become the holder of record of such Conversion Shares as of the applicable Conversion Date, irrespective of the date such Conversion Shares are credited to the Holder’s DTC account, the date of the book entry positions or the date of delivery of the certificates evidencing such Conversion Shares, as the case may be.

(iv)    In addition to any other rights available to any Holder, if the Corporation fails to cause the Conversion Agent to deliver to such Holder or its designee Conversion Shares in the manner required pursuant to this Section 10 within the Standard Settlement Period following the applicable Conversion Date and such Holder or such Holder’s broker on its behalf purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder anticipated receiving upon such conversion (a “Buy-In”) but did not receive within the Standard Settlement Period, then the Corporation shall, within two (2) Trading Days after such Holder’s request and in such Holder’s sole discretion, either (i) promptly honor its obligation to deliver to such Holder or its designee the Conversion Shares and pay cash to such Holder in an amount equal to the excess (if any) of such Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased in the Buy-In, less the product of (A) the number of shares of Common Stock purchased in the Buy-In, times (B) the Closing Price of a share of Common Stock on the applicable Conversion Date or (ii) pay cash to such Holder in an amount equal to such Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, at which point the Corporation’s obligation to deliver the Conversion Shares shall terminate. Such Holder shall provide the Corporation written notice promptly after the occurrence of a Buy-In, indicating the amounts payable to such Holder in respect of the Buy-In together with applicable confirmations and other evidence reasonably requested by the Corporation.

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11. Anti-Dilution Adjustments.

(a)         In order to prevent the dilution of the conversion rights granted hereunder, the Conversion Rate will be subject to the following adjustments:

(i) Stock Dividends and Distributions. If the Corporation pays dividends or other distributions on the Common Stock in shares of Common Stock, then the Conversion Rate in effect immediately prior to the Ex-Date for such dividend or distribution will be multiplied by the following fraction:

OS1

OS0

where,

OS0 = the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such dividend or distribution; and

OS1 = the sum of the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such dividend or distribution plus the total number of shares of Common Stock constituting such dividend or distribution.

The adjustment pursuant to this clause (i) will become effective at 9:00 a.m., New York City time on the Ex-Date for such dividend or distribution. If any dividend or distribution described in this clause (i) is authorized and declared but not so paid or made, the Conversion Rate will be readjusted, effective as of the date the Board of Directors publicly announces its decision not to make such dividend or distribution, to such Conversion Rate that would be in effect if such dividend or distribution had not been declared.

(ii) Subdivisions, Splits and Combination of the Common Stock. If the Corporation subdivides, splits or combines the shares of Common Stock, then the Conversion Rate in effect immediately prior to the effective date of such share subdivision, split or combination will be multiplied by the following fraction:

OS1

OS0

where,

OS0 = the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, split or combination.

OS1 = the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, split or combination.

The adjustment pursuant to this clause (ii) will become effective at 9:00 a.m., New York City time on the Ex-Date for such subdivision, split or combination. If any subdivision, split or combination described in this clause (ii) is announced but the outstanding shares of Common Stock are not subdivided, split or combined, the Conversion Rate will be readjusted, effective as of the date the Board of Directors publicly announces its decision not to subdivide, split or combine the outstanding shares of Common Stock, to such Conversion Rate that would be in effect if such subdivision, split or combination had not been announced.

(iii) Debt or Asset Distributions. If the Corporation distributes to all or substantially all holders of shares of Common Stock evidences of indebtedness, shares of capital stock, securities, cash or other assets (excluding any dividend or distribution referred to in clause (i) of this Section 11(a), any dividend or distribution paid exclusively in cash, any consideration payable in connection with a tender or exchange offer of indebtedness made by the Corporation or any of its subsidiaries, and any dividend of shares of capital stock of any class or series, or similar equity interests, of or relating to a subsidiary or other business unit in the case of certain spin-off transactions as described below), then the Conversion Rate in effect immediately prior to the Ex-Date for such distribution will be multiplied by the following fraction:

SP0

SP0 - FMV

where,

SP0 = the Current Market Price per share of Common Stock on such date.

FMV = the fair market value of the portion of the distribution applicable to one share of Common Stock on such date as determined by the Board of Directors; provided that, if “FMV” as set forth above is equal to or greater than “SP0” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder will receive on the date on which such distribution is made to holders of Common Stock, for each share of Series A Preferred Stock, the amount of such distribution such Holder would have received had such holder owned a number of shares of Common Stock equal to the Conversion Rate on the Ex-Date for such distribution.

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In a “spin-off,” where the Corporation makes a distribution to all or substantially all holders of shares of Common Stock consisting of capital stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit, the Conversion Rate will be adjusted on the fifteenth Trading Day after the effective date of the distribution by multiplying such Conversion Rate in effect immediately prior to such fifteenth Trading Day by the following fraction:

MP0 + MPS

MP0

where,

MP0 = the average of the Closing Prices of the Common Stock over the first ten Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution.

MPS = the average of the Closing Prices of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over the first ten Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as determined by the Board of Directors.

Any adjustment pursuant to this clause (iii) will become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such distribution. In the event that such distribution described in this clause (iii) is not so paid or made, the Conversion Rate will be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(iv) Cash Distributions. If the Corporation makes a distribution consisting exclusively of cash to all or substantially all holders of the Common Stock, excluding (a) any regular cash dividend on the Common Stock, (b) any cash that is distributed in a Reorganization Event or as part of a “spin-off” referred to in clause (iii) of this Section 11(a), (c) any dividend or distribution in connection with the Corporation’s liquidation, dissolution or winding up, and (d) any consideration payable in connection with a tender or exchange offer of indebtedness made by the Corporation or any of its subsidiaries, then in each event, the Conversion Rate in effect immediately prior to the Ex-Date for such distribution will be multiplied by the following fraction:

SP0

SP0 - DIV

where,

SP0 = the Closing Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date.

DIV = the amount per share of Common Stock of the dividend or distribution.

In the event that any distribution described in this clause (iv) is not so made, the Conversion Rate will be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such distribution, to the Conversion Rate which would then be in effect if such distribution had not been declared.

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(v) Self Tender Offers and Exchange Offers. If the Corporation or any of its subsidiaries successfully completes a tender or exchange offer for the Common Stock where the cash and the value of any other consideration included in the payment per share of the Common Stock exceeds the Closing Price per share of the Common Stock on the Trading Day immediately succeeding the expiration of the tender or exchange offer, then the Conversion Rate in effect at the close of business on such immediately succeeding Trading Day will be multiplied by the following fraction:

AC + (SP0 x OS1)

OS0 x SP0

where,

SP0 = the Closing Price per share of Common Stock on the Trading Day immediately succeeding the expiration of the tender or exchange offer.

OS0 = the number of shares of Common Stock outstanding immediately prior to the expiration of the tender or exchange offer, including any shares validly tendered and not withdrawn.

OS1 = the number of shares of Common Stock outstanding immediately after the expiration of the tender or exchange offer.

AC = the aggregate cash and fair market value of the other consideration payable in the tender or exchange offer, as determined by the Board of Directors.

Any adjustment made pursuant to this clause (v) will become effective immediately prior to 9:00 a.m., New York City time, on the Trading Day immediately following the expiration of the tender or exchange offer. In the event that the Corporation, or one of its subsidiaries, is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation, or such subsidiary, is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate will be readjusted to be such Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made.

(vi) Rights Plans. To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any shares of the Series A Preferred Stock, Holders will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such Conversion Date, the rights have separated from the shares of Common Stock, in which case the Conversion Rate will be adjusted at the time of separation as if the Corporation had made a distribution to all holders of the Common Stock as described in clause (iii) of this Section 11(a), subject to readjustment in the event of the expiration, termination or redemption of such rights.

(b) The Corporation may make such increases in the Conversion Rate, in addition to any other increases required by this Section 11, if the Board of Directors deems it advisable to avoid or diminish any income tax to holders of the Common Stock resulting from any dividend or distribution of shares of Common Stock (or issuance of rights or warrants to acquire shares of Common Stock) or from any event treated as such for income tax purposes or for any other reason.

(c) All adjustments to the Conversion Rate will be calculated to the nearest 1/10,000th of a share (or, if there is not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a share) of Common Stock. No adjustment in the Conversion Rate will be required unless such adjustment would require an increase or decrease of at least one percent (1.0%) therein; provided, however, that any adjustments which by reason of this subparagraph are not required to be made will be carried forward and taken into account in any subsequent adjustment; provided further that on any Conversion Date, adjustments to the Conversion Rate will be made with respect to any such adjustment carried forward and which has not been taken into account before such date.

(d) No adjustment to the Conversion Rate will be made if Holders may participate in the transaction that would otherwise give rise to an adjustment, as a result of holding the Series A Preferred Stock, without having to convert the Series A Preferred Stock, as if they held the full number of shares of Common Stock into which a share of the Series A Preferred Stock may then be converted.

(e) The Conversion Rate will not be adjusted:

(i) upon the issuance of any shares of the Common Stock or rights or warrants to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Corporation or any of its subsidiaries;

(ii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date shares of the Series A Preferred Stock were first issued, provided that such option, warrant or right are not amended after the date shares of the Series A Preferred Stock were first issued to extend the term thereof, to increase the number of shares issuable upon exercise, exchange or conversion thereof or decrease the price at which such option, warrant or right is exercisable, exchangeable or convertible;

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(iii) for a change in the par value or no par value of the Common Stock; or

(iv) for accrued and unpaid dividends on the Series A Preferred Stock.

(f) Whenever the Conversion Rate is to be adjusted in accordance herewith, the Corporation will:

(i) as soon as practicable following the occurrence of an event that requires an adjustment to the Conversion Rate pursuant to Section 11, taking into account the one percent (1.0%) threshold set forth above (or if the Corporation is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice to the Holders of the occurrence of such event; and

(ii) as soon as practicable following the determination of the revised Conversion Rate in accordance with Section 11(a), provide, or cause to be provided, a written notice to the Holders setting forth in reasonable detail the method by which the adjustment to the Conversion Rate was determined and setting forth the revised Conversion Rate.

12. Reorganization Events.

(a) A “Reorganization Event” will mean:

(i) any consolidation, merger or similar business combination of the Corporation with or into another Person, in each case pursuant to which the Common Stock will be converted into cash, securities or other property of the Corporation or another Person;

(ii) any sale, transfer, lease or conveyance to another Person of all or substantially all of the property and assets of the Corporation and its subsidiaries, taken as a whole, in each case pursuant to which the Common Stock will receive a distribution of cash, securities or other property of the Corporation or another Person;

(iii) any reclassification of the Common Stock into securities including securities other than the Common Stock; or

(iv) any statutory exchange of the outstanding shares of Common Stock for securities of another Person (other than in connection with a merger or acquisition).

(b) Upon the occurrence of a Reorganization Event prior to an applicable Conversion Date, each share of Series A Preferred Stock outstanding immediately prior to such Reorganization Event will, without the consent of any Holders, be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, and after satisfaction of all liabilities and obligations to creditors of the Corporation and subject to the rights of any securities ranking senior to the Series A Preferred Stock, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other Junior Securities, in full, the greater of the (i) amount per share equal to the liquidation value of $1,000 per share, plus all declared but unpaid dividends thereon, without regard to, or accumulation of, any undeclared dividends, and (ii) amount equal to the distribution amount of such assets or proceeds of the Corporation as was receivable by a holder of the number of shares of Common Stock into which such share of Series A Preferred Stock was convertible immediately prior to such Reorganization Event (such payment, the “Exchange Property”).

(c) In the event that holders of the shares of Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the Holders will also be entitled to make such election on the same basis as the holders of Common Stock.

(d) The above provisions of this Section 12 will similarly apply to successive Reorganization Events and the provisions of Section 11 will apply to any shares of capital stock of the Corporation (or any successor) received by the holders of the Common Stock in any such Reorganization Event.

(e) The Corporation (or any successor) will, at least twenty days prior to the occurrence of any Reorganization Event, provide written notice to the Holders of the anticipated occurrence of such event and of the type and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice will not affect the operation of this Section 12.

13. Voting Rights.

(a) Notwithstanding any stated or statutory voting rights, except as set forth in Section 13(b), the Holders will not be entitled to vote (in their capacity as Holders) on any matter submitted to a vote of the stockholders of the Corporation.

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(b) So long as any shares of Series A Preferred Stock are outstanding, the Corporation will not, without the written consent or affirmative vote, given in person or by proxy, at a meeting called for that purpose by holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting as a single and separate class, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series A Preferred Stock is treated in accordance with Section 12) any provision of (i) this Article IV-A of the Articles of Incorporation or (ii) the Articles of Incorporation, in either case, that would alter, modify or change the preferences, rights, privileges or powers of the Series A Preferred Stock so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of the Series A Preferred Stock; provided that any such amendment or alteration to any provision of this Article IV-A or the Articles of Incorporation that alters, modifies or changes the preferences, rights, privileges or powers of a particular Holder so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of such Holder in a manner disproportionate from any other Holder will require the prior written consent of such significantly and adversely affected Holder; provided, further, that (x) any increase in the amount of the authorized or issued Series A Preferred Stock or any securities convertible into Series A Preferred Stock or (y) the creation and issuance, or an increase in the authorized or issued amount, of any series of preferred stock of the Company, or any securities convertible into preferred stock of the Company, ranking equal with and/or senior to the Series A Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Corporation’s liquidation, dissolution or winding up, in either case, will, in and of itself, be deemed to significantly and adversely affect the preferences, rights, privileges or powers of the Series A Preferred Stock or any Holder.

(c) Notwithstanding the foregoing, the Corporation will not, without the written consent or affirmative vote, given in person or by proxy, at a meeting called for that purpose by the unanimous consent of the holders of the outstanding shares of Series A Preferred Stock, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series A Preferred Stock is treated in accordance with Section 12) the definition of Conversion Rate or Dividend Rate, or the liquidation preference of Series A Preferred Stock under this Article IV-A.

(d) Section 13(b) will not apply if, at or prior to the time when the act with respect to which the vote would otherwise be required will be effected, all outstanding shares of Series A Preferred Stock will have been converted into shares of Common Stock or otherwise reacquired by the Corporation.

(e) Except as expressly provided in this Section 13, each holder of Series A Preferred Stock will have one vote per share on any matter on which holders of Series A Preferred Stock are entitled to vote, including any action by written consent.

14. Fractional Shares.

(a) No fractional shares of Common Stock will be issued as a result of any conversion of shares of Series A Preferred Stock.

(b) In lieu of any fractional share of Common Stock otherwise issuable in respect of any conversion, the Holder will be entitled to receive an amount in cash (computed to the nearest cent) equal to the same fraction of the Closing Price of the Common Stock determined as of the second Trading Day immediately preceding the Conversion Date.

(c) If more than one share of the Series A Preferred Stock is surrendered for conversion at one time by or for the same Holder, the number of full shares of Common Stock issuable upon conversion thereof will be computed on the basis of the aggregate number of shares of the Series A Preferred Stock so surrendered.

15. Reservation of Common Stock.

(a) The Corporation will at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of shares of Series A Preferred Stock as provided in the Articles of Incorporation, free from any preemptive or other similar rights, such number of shares of Common Stock as will from time to time be issuable upon the conversion of all the shares of Series A Preferred Stock then outstanding at the Conversion Rate (as may be adjusted pursuant to Section 11). For purposes of this Section 15(a), the number of shares of Common Stock that will be deliverable upon the conversion of all outstanding shares of Series A Preferred Stock will be computed as if at the time of computation all such outstanding shares were held by a single Holder.

(b) All shares of Common Stock delivered upon conversion of the Series A Preferred Stock will be duly authorized, validly issued, fully paid and non-assessable.

(c) The Corporation covenants and agrees that, if at any time the Common Stock will be listed on any national securities exchange or automated quotation system, the Corporation will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock will be so listed on such exchange or automated quotation system, all Common Stock issuable upon conversion of the Series A Preferred Stock.

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16. Transfer Agent, Registrar, Paying Agent and Conversion Agent. The duly appointed Transfer Agent, Registrar, paying agent and Conversion Agent for the Series A Preferred Stock will initially be Equiniti Trust Company, LLC. The Corporation may, in its sole discretion, remove the Transfer Agent, Registrar, paying agent and/or Conversion Agent; provided that the Corporation will appoint a successor to such position(s) who will accept such appointment prior to the effectiveness of such removal.
17. Replacement Stock Certificates. If any of the Series A Preferred Stock certificates will be mutilated, lost, stolen or destroyed, upon the making of an affidavit of that fact by the Holder claiming such certificate to be mutilated, lost, stolen or destroyed and, if required by the Corporation, the posting by such Holder of a bond or security in such amount as the Corporation may determine is necessary as indemnity against any claim that may be made against it with respect to such certificate, the Corporation will, at the expense of the Holder, issue, in exchange and in substitution for and upon cancellation of the mutilated Series A Preferred Stock certificate, or in lieu of and substitution for the Series A Preferred Stock certificate lost, stolen or destroyed, a new Series A Preferred Stock certificate of like tenor and representing an equivalent amount of shares of Series A Preferred Stock.
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18. Notices. All notices referred to in this Article IV-A will be in writing, and, unless otherwise specified herein, all notices hereunder will be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first-class mail will be specifically permitted for such notice under the terms of this Article IV-A) with postage prepaid, addressed: (i) if to the Corporation, to the principal executive office of the Corporation or to the Transfer Agent at its principal office in the United States of America, or other agent of the Corporation designated as permitted by the Articles of Incorporation, or (ii) if to any Holder or holder of shares of Common Stock, as the case may be, to such Holder at the address of such Holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the Series A Preferred Stock or the Common Stock, as the case may be) or, as applicable, or by delivery electronically through the Applicable Procedures of the Depositary prescribed for giving such notice, or (iii) to such other address as the Corporation or any such Holder, as the case may be, will have designated by notice similarly given.
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19. Exclusion of Other Rights. The shares of Series A Preferred Stock will not have any voting powers except as expressly described herein, and, except as may otherwise be required by applicable law, will not have any preferences or relative, participating, optional or other special rights, other than those specifically set forth herein (as this Article IV-A may be amended from time to time) and in the Articles of Incorporation. The shares of Series A Preferred Stock will have no preemptive or subscription rights.
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20. Severability of Provisions. If any voting powers, preferences or relative, participating, optional or other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Article IV-A (as this Article IV-A may be amended from time to time) are invalid, unlawful or incapable of being enforced by reason of any rule of law, all other voting powers, preferences and relative, participating, optional and other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Article IV-A (as so amended) that can be given effect without the invalid, unlawful or unenforceable voting powers, preferences or relative, participating, optional or other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences or relative, participating, optional or other special rights of Series A Preferred Stock or qualifications, limitations and restrictions thereof herein set forth will be deemed dependent upon any other such voting powers, preferences or relative, participating, optional or other special rights of Series A Preferred Stock or qualifications, limitations and restrictions thereof unless so expressed herein.
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21. Determinations. The Corporation will have the sole right to make all calculations called for hereunder. Absent fraud or manifest error, such calculations shall be final and binding on all Holders. The Corporation will have the power to resolve any ambiguity and its action in so doing, as evidenced by a resolution of the Board of Directors, will be final and conclusive unless clearly inconsistent with the intent hereof.
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22. Repurchases. Subject to the limitations imposed herein, the Corporation may purchase shares of Series A Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors or any duly authorized committee of the Board may determine; provided that any repurchase of shares of Series A Preferred Stock by the Corporation will be subject to any Applicable Regulatory Approval.
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23. No Sinking Fund. Shares of Series A Preferred Stock are not subject to the operation of a sinking fund.
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24. Taxes.

(a) For U.S. federal income tax purposes the Corporation and each Holder intends to treat the Series A Preferred Stock as participating stock and not as preferred stock as defined under Treasury Regulations promulgated under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), Section 1.305.5 and shall complete any reporting in a manner consistent with such treatment.

(b) In the event that the Corporation reasonably determines in good faith that 40% or more of the Corporation’s USRPHC Asset Base (as defined below) consists of “United States real property interests” (within the meaning of Section 897(c)(1) of the Internal Revenue Code), the Corporation shall promptly notify the Holders of such determination in writing. For purposes of the foregoing, the Corporation’s “USRPHC Asset Base” shall mean the amount determined under Section 897(c)(2)(B) of the Internal Revenue Code.

(c) The Corporation and each Holder will bear their own respective costs, fees and expenses in connection with any conversion contemplated hereby, except that the Corporation will pay any and all transfer taxes, stamp taxes or duties, documentary taxes, or other similar taxes imposed upon the issuance of shares of Common Stock on account of any conversion contemplated hereby; provided that the Corporation will not be required to pay any such tax to the extent such tax is payable because a Holder requests Common Stock to be registered in a name other than such registered holder’s name, and no such Common Stock will be so registered unless and until the registered holder making such request has paid such taxes to the Corporation or has established to the satisfaction of the Corporation that such taxes have been paid or are not payable.

ARTICLE V.

The name and address of the incorporator of this corporation is John J. D’Angelo, 7244 Perkins Road, Baton Rouge, Louisiana 70808.

ARTICLE VI.

The business and the affairs of this corporation and all of the corporate powers thereof shall be vested in and shall be exercised exclusively by a Board of Directors, composed of not less than five (5) nor more than thirty (30) persons. A majority of the Board of Directors shall constitute a quorum for the transaction of any and all business, and the acts of a majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors.

Any Director absent from a meeting of the Board of Directors or any committee thereof may be represented by any other Director or shareholder, who may cast the vote of the absent Director by proxy according to the written instructions, general or special, of the absent Director.

The Board of Directors may designate one or more committees as it may deem necessary and proper, each committee to consist of one or more of the directors of this corporation (and one or more directors may be named as alternate members to replace any absent or disqualified regular members), which, to the extent provided by resolution of the Board or in these articles of incorporation or the bylaws, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of this corporation, and may have power to authorize the seal of this corporation to be affixed to documents. Such committee or committees shall have such name or names as may be stated in the articles of incorporation or the bylaws, or as may be determined, from time to time, by the Board of Directors. Any vacancy occurring in any such committee shall be filled by the Board of Directors, but the president may designate another director to serve on the committee pending action by the Board. Each such committee shall hold office during the term of the Board constituting it, unless otherwise ordered by the Board. The designation of and delegation of authority to a committee shall not relieve the directors of any responsibility imposed on them by law.

Any action which may be taken at a meeting of the Board of Directors or any committee thereof may be taken by a consent in writing signed by all of the Directors or by all members of the committee, and filed with the records of proceedings of the Board of Directors, and the Board of Directors or any committee thereof may participate in and hold meetings by means of conference telephone or other similar means of communication, provided that all persons participating in the meeting can hear and communicate with each other.

Any vacancy that may exist or occur among the Directors, either by death, resignation or otherwise, shall be filled by election by the remaining directors, and any director or directors so elected to fill any vacancy, shall hold office until the next regular election or until their successor or successors shall be elected and qualified.

ARTICLE VII.

The Board of Directors of this corporation shall elect a President, a Secretary and a Treasurer, and may elect a Chief Executive Officer, a Chief Financial Officer and one or more Vice Presidents. Any two of these offices may be combined in one person, provided that no person holding more than one office may sign in more than one capacity any certificate or other instrument required by law to be signed by two officers.

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ARTICLE VIII.

The Board of Directors shall have the power to adopt, amend and alter by-laws for the government of this corporation not inconsistent with the provisions of law or these articles of incorporation.

ARTICLE IX.

In all matters to be voted upon by shareholders including the election of directors, each shareholder of record shall be entitled to one (1) vote, either in person or by proxy, for each share of common stock outstanding in his/her/its name on the books of this corporation. Cumulative voting is prohibited and the Directors shall be elected by plurality vote.

ARTICLE X.

1. The vote of two-thirds of the voting power present in person or by proxy at an annual or special meeting of shareholders shall be required to amend the articles of incorporation of this corporation.
2. Except as otherwise provided in the Louisiana Business Corporation Law, the vote of two-thirds of the voting power present in person or by proxy at an annual or special meeting of shareholders shall be required in connection with a merger, consolidation or share exchange to which this corporation is a party.
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3. The vote of two-thirds of the total voting power of this corporation at a special meeting of the shareholders shall be required to dissolve or to sell, lease, exchange or otherwise dispose of all or substantially all of the assets of this corporation.
--- ---

ARTICLE XI.

Neither the incorporators nor the shareholders shall ever be held liable for the contracts of this corporation, nor shall any informality or defect in organization of this corporation have the effect of rendering these articles of incorporation null or of making the incorporators or shareholders personally liable for any of the acts of this corporation.

The directors and officers of this corporation shall have no personal liability to this corporation or its shareholders for monetary damages for a breach of fiduciary duty as a director or officer. This provision shall not eliminate or limit the personal liability of any director or any officer (a) for any breach of the directors’ or officers’ duty of loyalty to this corporation or its shareholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of a law; (c) for liability under Section 92(D) of the Louisiana Business Corporation Law; or (d) for any transaction from which the director or officer derived an improper personal benefit.

*         *         *         *         *

18

ex_825659.htm

Exhibit 31.1

CERTIFICATIONS

I, John J. D’Angelo, certify that:

  1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2025 of Investar Holding Corporation;

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

  1. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2025 /s/ John J. D’Angelo
John J. D’Angelo
President and Chief Executive Officer
(Principal Executive Officer)

ex_825660.htm

Exhibit 31.2

CERTIFICATIONS

I, John R. Campbell, certify that:

  1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2025 of Investar Holding Corporation;

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

  1. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2025 /s/ John R. Campbell
John R. Campbell
Chief Financial Officer
(Principal Financial Officer)

ex_825661.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Investar Holding Corporation (the “Company”) for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John J. D’Angelo, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

Date: August 6, 2025 /s/ John J. D’Angelo
John J. D’Angelo
President and Chief Executive Officer
(Principal Executive Officer)

ex_825662.htm

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Investar Holding Corporation (the “Company”) for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John R. Campbell, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

Date: August 6, 2025 /s/ John R. Campbell
John R. Campbell
Chief Financial Officer
(Principal Financial Officer)

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