Investar Holding Corp (ISTR) stock intrinsic value fair value estimate & owner earnings analysis

Investar Holding Corporation is the Baton Rouge, Louisiana holding company for Investar Bank, a community bank serving individuals, professionals and small to mid-sized businesses in south Louisiana, Texas and Alabama. At the end of 2025 it had $2.8 billion of assets, $2.1 billion of net loans and $2.4 billion of deposits. On January 1, 2026 it completed the purchase of Wichita Falls Bancshares (First National Bank, Wichita Falls, Texas; $1.2 billion of assets, $1.0 billion of loans, $1.0 billion of deposits) for about 3.96 million new shares plus $7.2 million in cash. That deal, funded partly by $32.5 million of convertible preferred stock issued in July 2025, raises the share count from roughly 10 million to about 15.5 million (including the preferred on an as-converted basis), so all values below are per share on the enlarged base. How we measure earnings. We start from cash generated by operations, remove swings in receivables, other assets and accrued liabilities, and then subtract stock compensation and the capital spending needed just to stay in business. Per share on the share counts of each year, this gives roughly $0.88 (2016), $1.20 (2017), $1.42 (2018), $1.28 (2019), $1.78 (2020), $2.91 (2021), $4.12 (2022), $1.74 (2023), $1.47 (2024) and $1.66 (2025). Two judgements matter. First, a bank's cash flow adds back the provision for loan losses, which is a real cost even though it is non-cash; in 2020 and 2021 that add-back was $11.2 million and $22.9 million (2021 net income was only $8.0 million), so those years overstate what shareholders could take out and we did not rely on them. 2022 was an unusually strong outlier (net income $35.7 million) and 2016 pre-dates the acquisitions and included a large mortgage-banking operation. Second, we used the median of 2022 to 2025, which is about $1.70 per share, so the outliers do not move it. 2025 earnings rose about 13% over 2024 ($1.66 versus $1.47); we assume no growth in year one, which is below that, because the increase came partly from a small uptick in revenue and lower capital spending, not from anything we can name that will repeat. What we credit and what we leave out. The company has bought eight banks since 2011, but each deal was paid for with new shares or debt raised for the purpose, not with its own cash, and results after each one have been uneven, so we give no credit for future acquisitions, loan growth or cost savings from the Wichita Falls integration. We do credit that the deposit franchise keeps earning at the level it has already shown, without growth, and we assume it fades gradually rather than lasting forever because the company's record only covers about twenty years. Interest-rate moves, share gains and management targets are left out. Bear case, about $9.50 per share. Credit losses return to the level of 2021, when the provision consumed most of a year's profit, and the newly acquired north Texas loans (new territory for the company) do not perform as well as the legacy book. Earnings settle near $1.00 per share for ten years, then fade to zero over the following ten. Base case, about $19 per share. Earnings hold at the $1.70 median for ten years, then fade to zero over the following twenty years. Recent credit has been clean: the company recorded credit-loss reversals in 2023, 2024 and 2025. Bull case, about $25 per share. The first half of 2026 (net income $21.5 million, $1.38 diluted per share; roughly $15 million of owner earnings on our measure, or about $2.00 per share annualized) shows the combined bank can earn more than the anchor. In this case earnings stay near $2.00 per share for twenty years, then fade over ten. Only two quarters of combined results exist, which is why this level is not used in the base case. What would make this wrong. Higher-than-expected loan losses (particularly commercial real estate) or trouble integrating the Texas bank would push toward the bear case. Conversion of the preferred stock is already counted in the share count, but further share issuance for future acquisitions would dilute per-share value. In the other direction, if the combined bank sustains the first-half level, the bull case becomes the more realistic one. We could not reconcile every year's cash flow to a standalone loan-loss picture from the filings we reviewed; the credit-cost adjustments above are our judgement. A margin-of-safety price of $9 leaves a wide margin against a bank with a recent large acquisition, a credit history that includes a bad year (2021), and a share count that has just risen by about half. It sits just below the bear case.