Document

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, 2019

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 001-38487
Origin Bancorp, Inc.

(Exact name of registrant as specified in its charter)
Louisiana
 
72-1192928
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)

500 South Service Road East
Ruston, Louisiana 71270
(318) 255-2222
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
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, par value $5.00 per share
OBNK
Nasdaq Global Select 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. (Check one):
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 Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 23,474,238 shares of Common Stock, par value $5.00 per share, were issued and outstanding as of August 5, 2019.






ORIGIN BANCORP, INC.
FORM 10-Q
JUNE 30, 2019
INDEX
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements preceded by, followed by or that otherwise include the words "anticipates," "believes," "estimates," "expects," "foresees," "intends," "plans," "projects" and similar expressions or future or conditional verbs such as "could," "may," "should," "will," "might" and "would," or variations or negatives of such terms are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. Forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in our forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:
deterioration of our asset quality;
factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;
changes in the value of collateral securing our loans;
our ability to anticipate interest rate changes and manage interest rate risk;
the effectiveness of our risk management framework and quantitative models;
our inability to receive dividends from our bank subsidiary and to service debt, pay dividends to our common stockholders, repurchase our shares of common stock and satisfy obligations as they become due;
business and economic conditions generally and in the financial services industry, nationally and within our local market area;
changes in our operation or expansion strategy or our ability to prudently manage our growth and execute our strategy;
changes in management personnel;
our ability to maintain important deposit customer relationships, our reputation or otherwise avoid liquidity risks;
increasing costs as we grow deposits;
operational risks associated with our business;
volatility and direction of market interest rates;
increased competition in the financial services industry, particularly from regional and national institutions;
changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, as well as tax, trade, monetary and fiscal matters;
periodic changes to the extensive body of accounting rules and best practices, including the current expected credit loss model, may change the treatment and recognition of critical financial line items and affect our profitability;
further government intervention in the U.S. financial system;

3


compliance with governmental and regulatory requirements, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and others relating to banking, consumer protection, securities and tax matters;
uncertainty regarding the future of the London Interbank Offered Rate and any replacement alternatives on our business;
natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, and other matters beyond our control;
cybersecurity threats and the cost of defending against them;
other factors that are discussed in the sections titled "Item 1A. Risk Factors" in this report and in our annual report on Form 10-K for the year ended December 31, 2018; and
our ability to manage the risks involved in the foregoing.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. In addition, as a result of these and other factors, our past financial performance should not be relied upon as an indication of future performance. Accordingly, you should not place undue reliance on any forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties emerge from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.


4

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORIGIN BANCORP, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)

 
June 30, 2019
 
December 31, 2018
Assets
(Unaudited)
 
 
Cash and due from banks
$
75,204

 
$
71,008

Interest-bearing deposits in banks
124,356

 
45,670

Total cash and cash equivalents
199,560

 
116,678

Securities:
 
 
 
Available for sale
548,980

 
575,644

Held to maturity (fair value of $29,334 and $19,136 at June 30, 2019, and December 31, 2018, respectively)
28,897

 
19,169

Securities carried at fair value through income
11,615

 
11,361

Total securities
589,492

 
606,174

Non-marketable equity securities held in other financial institutions
49,008

 
42,149

Loans held for sale ($34,401 and $21,562 at fair value at June 30, 2019, and December 31, 2018, respectively)
58,408

 
52,210

Loans, net of allowance for loan losses of $36,683 and $34,203 at June 30, 2019, and December 31, 2018, respectively; $18,273 and $18,571 at fair value, at June 30, 2019, and December 31, 2018, respectively)
3,947,914

 
3,754,902

Premises and equipment, net
80,672

 
75,014

Mortgage servicing rights
21,529

 
25,114

Cash surrender value of bank-owned life insurance
33,070

 
32,706

Goodwill and other intangible assets, net
32,144

 
32,861

Accrued interest receivable and other assets
107,828

 
83,768

Total assets
$
5,119,625

 
$
4,821,576

Liabilities and Stockholders' Equity
 
 
 
Noninterest-bearing deposits
$
1,003,499

 
$
951,015

Interest-bearing deposits
2,011,719

 
2,027,720

Time deposits
839,794

 
804,403

Total deposits
3,855,012

 
3,783,138

Federal Home Loan Bank ("FHLB") advances and other borrowings
601,346

 
445,224

Junior subordinated debentures, net
9,657

 
9,644

Accrued expenses and other liabilities
69,317

 
33,791

Total liabilities
4,535,332

 
4,271,797

Commitments and contingencies


 


Stockholders' equity:
 
 
 
Preferred stock, no par value, 2,000,000 shares authorized, zero issued at June 30, 2019, and December 31, 2018

 

Common stock ($5.00 par value; 50,000,000 shares authorized; 23,774,238 and 23,726,559 shares issued at June 30, 2019, and December 31, 2018, respectively)
118,871

 
118,633

Additional paid‑in capital
243,002

 
242,041

Retained earnings
216,801

 
191,585

Accumulated other comprehensive income (loss)
5,619

 
(2,480
)
Total equity
584,293

 
549,779

Total liabilities and stockholders' equity
$
5,119,625

 
$
4,821,576


The accompanying notes are an integral part of these condensed consolidated financial statements.
5

ORIGIN BANCORP, INC.
Condensed Consolidated Statements of Income
(unaudited)
(Dollars in thousands, except per share amounts)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Interest and dividend income
 
 
 
 
 
 
 
Interest and fees on loans
$
51,461

 
$
40,219

 
$
100,636

 
$
77,693

Investment securities-taxable
3,208

 
2,057

 
6,549

 
3,797

Investment securities-nontaxable
871

 
1,156

 
1,729

 
2,340

Interest and dividend income on assets held in other financial institutions
1,523

 
1,320

 
2,643

 
2,366

Total interest and dividend income
57,063

 
44,752

 
111,557

 
86,196

Interest expense
 
 
 
 
 
 
 
Interest-bearing deposits
11,540

 
6,820

 
22,037

 
12,800

FHLB advances and other borrowings
2,415

 
624

 
4,249

 
1,228

Subordinated debentures
139

 
138

 
276

 
274

Total interest expense
14,094

 
7,582

 
26,562

 
14,302

Net interest income
42,969

 
37,170

 
84,995

 
71,894

Provision (benefit) for credit losses
1,985

 
311

 
2,990

 
(1,213
)
Net interest income after provision (benefit) for credit losses
40,984

 
36,859

 
82,005

 
73,107

Noninterest income
 
 
 
 
 
 
 
Service charges and fees
3,435

 
3,157

 
6,751

 
6,171

Mortgage banking revenue
3,252

 
2,317

 
5,858

 
4,711

Insurance commission and fee income
3,036

 
1,826

 
6,546

 
3,933

(Loss) gain on sales and disposals of other assets, net
(166
)
 
121

 
(163
)
 
60

Other fee income
360

 
403

 
636

 
855

Other income
1,259

 
2,791

 
3,152

 
4,685

Total noninterest income
11,176

 
10,615

 
22,780

 
20,415

Noninterest expense
 
 
 
 
 
 
 
Salaries and employee benefits
22,764

 
19,859

 
45,377

 
38,100

Occupancy and equipment, net
4,200

 
3,793

 
8,244

 
7,446

Data processing
1,810

 
1,347

 
3,397

 
2,820

Electronic banking
892

 
680

 
1,581

 
1,423

Communications
647

 
510

 
1,233

 
1,025

Advertising and marketing
1,089

 
1,022

 
1,887

 
1,679

Professional services
839

 
598

 
1,743

 
1,263

Regulatory assessments
691

 
660

 
1,402

 
1,380

Loan related expenses
790

 
798

 
1,459

 
1,511

Office and operations
1,849

 
1,588

 
3,330

 
2,866

Other expenses
1,524

 
1,157

 
2,823

 
2,356

Total noninterest expense
37,095

 
32,012

 
72,476

 
61,869

Income before income tax expense
15,065

 
15,462

 
32,309

 
31,653

Income tax expense
2,782

 
2,760

 
5,871

 
5,544

Net income
$
12,283

 
$
12,702

 
$
26,438

 
$
26,109

Preferred stock dividends
$

 
$
808

 
$

 
$
1,923

Net income allocated to participating stockholders

 
40

 

 
921

Net income available to common stockholders
$
12,283

 
$
11,854

 
$
26,438

 
$
23,265

Basic earnings per common share
$
0.52

 
$
0.54

 
$
1.12

 
$
1.14

Diluted earnings per common share
0.52

 
0.53

 
1.11

 
1.13


The accompanying notes are an integral part of these condensed consolidated financial statements.
6

ORIGIN BANCORP, INC.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
(Dollars in thousands)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
12,283

 
$
12,702

 
$
26,438

 
$
26,109

Other comprehensive income (loss)
 
 
 
 
 
 
 
Securities available for sale and transferred securities:


 
 
 
 
 
 
Net unrealized holding gains (losses) arising during the period
5,351

 
(1,696
)
 
10,515

 
(7,380
)
Net losses realized as a yield adjustment in interest on investment securities
(3
)
 
(3
)
 
(5
)
 
(5
)
Change in the net unrealized gains (losses) on investment securities, before tax
5,348

 
(1,699
)
 
10,510

 
(7,385
)
Income tax expense (benefit) related to net unrealized gains (losses) arising during the period
1,123

 
(357
)
 
2,207

 
(1,551
)
Change in the net unrealized gain (loss) on investment securities, net of tax
4,225

 
(1,342
)
 
8,303

 
(5,834
)
Cash flow hedges:
 
 
 
 
 
 
 
Net unrealized (losses) gains arising during the period
(150
)
 
67

 
(228
)
 
265

Reclassification adjustment for gains (losses) included in net income
14

 
5

 
30

 
21

Change in the net unrealized (loss) gain on cash flow hedges, before tax
(164
)
 
62

 
(258
)
 
244

Income tax expense related to net unrealized (losses) gains on cash flow hedges
(34
)
 
13

 
(54
)
 
51

Change in the net unrealized (loss) gain on cash flow hedges, net of tax
(130
)
 
49

 
(204
)
 
193

Other comprehensive income (loss), net of tax
4,095

 
(1,293
)
 
8,099

 
(5,641
)
Comprehensive income
$
16,378

 
$
11,409

 
$
34,537

 
$
20,468



The accompanying notes are an integral part of these condensed consolidated financial statements.
7

ORIGIN BANCORP, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
(Dollars in thousands, except per share amounts)

 
Common Shares Outstanding
 
Preferred
Stock
Series
SBLF
 
Preferred
Stock
Series D
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Less: Retirement Plan-Owned Shares
 
Total
Stockholders'
Equity
Balance at January 1, 2018
19,518,752

 
$
48,260

 
$
16,998

 
$
97,594

 
$
146,061

 
$
145,122

 
$
1,307

 
$
(34,991
)
 
$
420,351

Net income

 

 

 

 

 
13,407

 

 

 
13,407

Other comprehensive loss, net of tax

 

 

 

 

 

 
(4,348
)
 

 
(4,348
)
Reclassification of tax effects related to the adoption of ASU 2018-02

 

 

 

 

 
(282
)
 
282

 

 

Recognition of stock compensation, net
6,489

 

 

 
32

 
140

 

 

 

 
172

Dividends declared - Series SBLF preferred stock (1)

 

 

 

 

 
(1,086
)
 

 

 
(1,086
)
Dividends declared - Series D preferred stock ($0.0325 per share)

 

 

 

 

 
(29
)
 

 

 
(29
)
Dividends declared - common stock ($0.0325 per share)

 

 

 

 

 
(634
)
 

 

 
(634
)
Balance at March 31, 2018
19,525,241

 
48,260

 
16,998

 
97,626

 
146,201

 
156,498

 
(2,759
)
 
(34,991
)
 
427,833

Net income

 

 

 

 

 
12,702

 

 

 
12,702

Other comprehensive loss, net of tax

 

 

 

 

 

 
(1,293
)
 

 
(1,293
)
Recognition of stock compensation, net
31,752

 

 

 
159

 
61

 

 

 

 
220

Termination of ESOP put option

 

 

 

 

 

 

 
34,991

 
34,991

Stock issuance - common
3,045,426

 

 

 
15,227

 
79,508

 

 

 

 
94,735

Redemption of preferred stock - Series SBLF

 
(48,260
)
 

 

 

 

 

 

 
(48,260
)
Conversion of preferred stock - Series D to common stock
901,644

 
 
 
(16,998
)
 
4,508

 
12,490

 

 

 

 

Dividends declared - Series SBLF preferred stock (1)

 

 

 

 

 
(808
)
 

 

 
(808
)
Dividends declared - common stock ($0.0325 per share)

 

 

 

 

 
(764
)
 

 

 
(764
)
Balance at June 30, 2018
23,504,063

 




117,520


238,260


167,628


(4,052
)



519,356

Net income

 

 

 

 

 
12,318

 

 

 
12,318

Other comprehensive loss, net of tax

 

 

 

 

 

 
(2,145
)
 

 
(2,145
)
Recognition of stock compensation, net
50,348

 

 

 
252

 
259

 

 

 

 
511

Stock issuance - common

 

 

 

 
(59
)
 

 

 

 
(59
)
Stock issuance - RCF acquisition
66,824

 

 

 
334

 
2,372

 

 

 

 
2,706

Dividends declared - common stock ($0.0325 per share)

 

 

 

 

 
(768
)
 

 

 
(768
)
Balance at September 30, 2018
23,621,235

 

 

 
118,106

 
240,832

 
179,178

 
(6,197
)
 

 
531,919

Net income

 

 

 

 

 
13,178

 

 

 
13,178

Other comprehensive loss, net of tax

 

 

 

 

 

 
3,717

 

 
3,717

Recognition of stock compensation, net
105,324

 

 

 
527

 
568

 

 

 

 
1,095

Tax benefit of 2018 stock issuance cost

 

 

 

 
641

 

 

 

 
641

Dividends declared - common stock ($0.0325 per share)

 

 

 

 

 
(771
)
 

 

 
(771
)
Balance at December 31, 2018
23,726,559

 
$

 
$

 
$
118,633

 
$
242,041

 
$
191,585

 
$
(2,480
)
 
$

 
$
549,779

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8

ORIGIN BANCORP, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity - Continued
(unaudited)
(Dollars in thousands, except per share amounts)


 
Common Shares Outstanding
 
Preferred
Stock
Series
SBLF
 
Preferred
Stock
Series D
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Less: Retirement Plan-Owned Shares
 
Total
Stockholders'
Equity
Balance at January 1, 2019
23,726,559

 
$

 
$

 
$
118,633

 
$
242,041

 
$
191,585

 
$
(2,480
)
 
$

 
$
549,779

Net income

 

 

 

 

 
14,155

 

 

 
14,155

Other comprehensive income, net of tax

 

 

 

 

 

 
4,004

 

 
4,004

Impact of adoption of ASU 2016-02 related to leases

 

 

 

 

 
321

 

 

 
321

Recognition of stock compensation, net
19,426

 

 

 
97

 
538

 

 

 

 
635

Dividends declared - common stock ($0.0325 per share)

 

 

 

 

 
(772
)
 

 

 
(772
)
Balance at March 31, 2019
23,745,985

 

 

 
118,730

 
242,579

 
205,289

 
1,524

 

 
568,122

Net income

 

 

 

 

 
12,283

 

 

 
12,283

Other comprehensive income, net of tax

 

 

 

 

 

 
4,095

 

 
4,095

Recognition of stock compensation, net
28,253

 

 

 
141

 
423

 

 

 

 
564

Dividends declared - common stock ($0.0325 per share)

 

 

 

 

 
(771
)
 

 

 
(771
)
Balance at June 30, 2019
23,774,238

 
$

 
$

 
$
118,871

 
$
243,002

 
$
216,801

 
$
5,619

 
$

 
$
584,293

____________________________
(1) 
The dividend rate on the Senior Non-Cumulative Perpetual Preferred stock, Series SBLF ("SBLF preferred stock") was payable quarterly at a fixed annual rate of 9%. The Company redeemed all 48,260 shares of the SBLF preferred stock in June 2018.


The accompanying notes are an integral part of these condensed consolidated financial statements.
9

ORIGIN BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(Dollars in thousands)

 
Six Months Ended June 30,
Cash flows from operating activities:
2019
 
2018
Net income
$
26,438

 
$
26,109

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision (benefit) for credit losses
2,990

 
(1,213
)
Depreciation and amortization
3,294

 
2,698

Net amortization on securities
105

 
730

Amortization of investments in tax credit funds
810

 
975

Deferred income tax (benefit) expense
(986
)
 
3,163

Stock-based compensation expense
1,034

 
417

Originations of mortgage loans held for sale
(123,922
)
 
(156,646
)
Proceeds from mortgage loans held for sale
110,469

 
159,321

Gain on mortgage loans held for sale, including origination of servicing rights
(3,078
)
 
(993
)
Net loss on disposals of premises and equipment
73

 
19

Increase in the cash surrender value of life insurance
(364
)
 
(333
)
Gain on equity securities without a readily determinable fair value
(367
)
 
(1,977
)
Net losses (gains) on sales and write downs of other real estate owned
90

 
(79
)
Other operating activities, net
11,466

 
(2,173
)
Net cash provided by operating activities
28,052

 
30,018

Cash flows from investing activities:
 
 
 
Purchases of securities available for sale
(6,823
)
 
(318,649
)
Maturities, paydowns and calls of securities available for sale
43,898

 
207,554

Purchases of securities held to maturity
(10,000
)
 

Maturities, paydowns and calls of securities held to maturity
266

 
456

Paydowns of securities carried at fair value
240

 
230

Net purchases of non-marketable equity securities held in other financial institutions
(6,192
)
 

Originations of mortgage warehouse loans
(1,835,136
)
 
(2,237,738
)
Proceeds from pay-offs of mortgage warehouse loans
1,818,065

 
2,222,288

Net increase in loans, excluding mortgage warehouse and loans held for sale
(173,969
)
 
(118,178
)
Return of capital on limited partnership investments
401

 
144

Capital calls on limited partnership investments
(821
)
 
(2,125
)
Purchases of premises and equipment
(8,488
)
 
(2,261
)
Proceeds from sales of premises and equipment
27

 
111

Proceeds from sales of other real estate owned
95

 
586

Net cash used in investing activities
(178,437
)
 
(247,582
)

The accompanying notes are an integral part of these condensed consolidated financial statements.
10

ORIGIN BANCORP, INC.
Condensed Consolidated Statements of Cash Flows - Continued
(Dollars in thousands)


 
Six Months Ended June 30,
Cash flows from financing activities:
2019
 
2018
Net increase in deposits
$
71,874

 
$
160,083

Repayments on long-term FHLB advances
(865
)
 
(499
)
Net increase (decrease) in short-term FHLB advances
170,001

 

Net decrease in securities sold under agreements to repurchase
(6,372
)
 
(1,676
)
Dividends paid
(1,537
)
 
(4,407
)
Taxes paid related to net share settlement of equity awards

 
(25
)
Cash received from exercise of stock options
166

 

Proceeds from issuance of common stock, net of offering expenses

 
94,735

Redemption of Series SBLF preferred stock

 
(48,260
)
Net cash provided by financing activities
233,267

 
199,951

Net increase (decrease) in cash and cash equivalents
82,882

 
(17,613
)
Cash and cash equivalents at beginning of period
116,678

 
187,187

Cash and cash equivalents at end of period
$
199,560

 
$
169,574

 
 
 
 
Interest paid
$
25,996

 
$
14,700

Income taxes paid
638


374

Significant non-cash transactions:
 
 
 
Real estate acquired in settlement of loans


662

Conversion of Series D preferred stock to common stock

 
16,998


The accompanying notes are an integral part of these condensed consolidated financial statements.
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ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements


Note 1 - Significant Accounting Policies
Nature of Operations. Origin Bancorp, Inc. ("Company") is a financial holding company headquartered in Ruston, Louisiana. The Company's wholly owned bank subsidiary, Origin Bank ("Bank"), provides a broad range of financial services to businesses, municipalities, high net worth individuals and retail clients. The Company currently operates 43 banking centers located in North Louisiana, Central Mississippi, Dallas/Fort Worth and Houston, Texas. The Company principally operates in one business segment, community banking.
Basis of Presentation. The condensed consolidated financial statements in this quarterly report on Form 10-Q include the accounts of the Company and all other entities in which Origin Bancorp, Inc. has a controlling financial interest, including the Bank and Davison Insurance Agency, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements in this quarterly report on Form 10-Q have not been audited by an independent registered public accounting firm, excluding the figures as of December 31, 2018, but in the opinion of management, reflect all adjustments necessary for fair presentation of the Company's financial position and results of operations for the periods presented. These condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
These condensed consolidated statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company's annual report on Form 10-K ("2018 Form 10-K") filed with the SEC. Operating results for the interim periods disclosed herein are not necessarily indicative of results that may be expected for a full year. Certain prior year amounts have been reclassified to conform to the current year financial statement presentations. These reclassifications did not impact previously reported net income or comprehensive income.
The Company's significant accounting policies, including those for loans, impaired loans, non-accrual loans and allowance for loan losses, are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2018, included in the Company's 2018 Form 10-K ("Note 1"). Except as described in the following paragraph, there have been no changes to the Company's significant accounting policies since December 31, 2018.
Effective January 1, 2019, two accounting policies were revised and updated from the accounting policies described in Note 1. Effective January 1, 2019, the Company began calculating earnings per share using the treasury method due to the conversion and redemption of all material participating securities during 2018, which eliminated the requirement to calculate earnings per share using the two-class method. See the discussion below titled "Earnings Per Share" for an explanation of these methodologies. Additionally, on January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), resulting in a change to the Company's lease accounting policies. See the discussion below titled "Effect of Recently Adopted Accounting Standards" for a description of policy revisions resulting from the Company's adoption of ASU 2016-02. For interim reporting purposes, the Company follows the same accounting policies and considers each interim period as an integral part of an annual period.
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Material estimates that are particularly susceptible to change include the allowance for loan losses; the evaluation of investment securities for other than temporary impairment; fair value measurements of assets and liabilities; and income taxes. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the Company's consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual results could differ from those estimates.

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ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements

Earnings Per Share. Basic and diluted earnings per common share for periods beginning after December 31, 2018, are calculated using the treasury method. Under the treasury method, basic earnings per share is calculated as net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options and restricted stock awards.
Basic and diluted earnings per common share for periods ending on or before December 31, 2018, were calculated using the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each share of common stock and participating securities according to dividends declared (distributed earnings) and participation rights in undistributed earnings. Distributed and undistributed earnings were allocated between common and participating security stockholders based on their respective rights to receive dividends. Share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents were considered participating securities (e.g., restricted stock grants). Preferred stock that receives dividends based on dividends paid on common stock was also considered a participating security (e.g., Series D preferred stock). Net income attributable to common stockholders was then divided by the weighted average number of common shares outstanding during the period, net of participating securities.
Diluted income per common share under the two-class method considers common stock issuable under the assumed release of unvested restricted stock awards, convertible preferred stock being converted to common stock, and the assumed exercise of stock options granted. The dilutive effect of share-based payment awards that were not deemed to be participating securities was calculated using the treasury stock method, which assumes that the proceeds from exercise were used to purchase common stock at the average market price for the period. The dilutive effect of participating securities was calculated using the more dilutive of the treasury stock method (which assumes that the participating securities are exercised/released) or the two-class method (which assumes that the participating securities are not exercised/released and earnings are reallocated between common and participating security stockholders). Potentially dilutive common stock equivalents were excluded from the computation of diluted earnings per common share in periods in which the effect would be antidilutive.
Effect of Recently Adopted Accounting Standards
ASU No. 2016-02 — Leases (Topic 842). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use ("ROU") asset on the balance sheet for operating leases. Accounting for finance (formerly known as capital) leases is substantially unchanged. The Company adopted this ASU as of January 1, 2019. Please see Note 6 - Leases for more information.
Effect of Newly Issued But Not Yet Effective Accounting Standards
ASU No. 2018-13, Fair Value Measurement - (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in Financial Accounting Standards Board ("FASB") Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. For public business entities that file reports with the SEC, the amendments in the update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on the consolidated financial statements and disclosures.
ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current U.S. GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current U.S. GAAP. However, Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company anticipates a significant change in the processes and procedures to calculate the allowance for credit losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses at the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall

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ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements

impact on its results of operations, financial position or disclosures. However, the Company has begun developing processes and procedures to ensure the Company is compliant at the required adoption date. Among other things, the Company has (1) selected a third-party vendor to provide a software solution, (2) evaluated data needs and data gaps (3) considered pooling criteria, (4) evaluated different loss estimation methodologies, (5) considered various forecasting models and forecast periods, and (6) begun evaluating accounting processes and internal controls that will be impacted by the adoption of the new standard. For public business entities that are SEC filers, the amendments in the update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company continues to evaluate the impact of this ASU on the consolidated financial statements and disclosures.

Note 2 - Earnings Per Share
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(Dollars in thousands, except per share amounts)
2019 (1)
 
2018 (1)
 
2019 (1)
 
2018 (1)
Basic earnings per common share
 
 
 
 
 
 
 
Net income
$
12,283

 
$
12,702

 
$
26,438

 
$
26,109

Less: Dividends to preferred stock

 
808

 

 
1,923

Less: Net income allocated to participating stockholders

 
40

 

 
921

Net income available to common stockholders
$
12,283

 
$
11,854

 
$
26,438

 
$
23,265

Weighted average common shares outstanding
23,585,040

 
22,107,489

 
23,577,335

 
20,451,960

Basic earnings per common share
$
0.52

 
$
0.54

 
$
1.12

 
$
1.14

Diluted earnings per common share
 
 
 
 
 
 
 
Diluted earnings applicable to common stockholders(2)
$
12,283

 
$
11,876

 
$
26,438

 
$
23,318

Weighted average diluted common shares outstanding:
 
 
 
 
 
 
 
Weighted average common shares outstanding
23,585,040

 
22,107,489

 
23,577,335

 
20,451,960

Dilutive effect of stock-based awards
201,606

 
274,514

 
204,023

 
274,514

Weighted average diluted common shares outstanding
23,786,646

 
22,382,003

 
23,781,358

 
20,726,474

Diluted earnings per common share
$
0.52

 
$
0.53

 
$
1.11

 
$
1.13

____________________________
(1) 
Series D preferred stockholders were participating stockholders during the three and six months ended June 30, 2018, requiring the Company to calculate earnings per share using the two-class method. Subsequent to the conversion of all Series D preferred stock in June 2018, the Company used the treasury method for the computation of earnings per share.
(2) 
The two-class method for the computation of earnings per share was used for the three and six months ended June 30, 2018. Net income available to common stockholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common stock equivalents for options to dilutive shares outstanding, which alters the ratio used to allocate earnings to common stockholders and participating securities for the purposes of calculating diluted earnings per share.


14

Table of Contents
ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements

Note 3 - Securities
The following table is a summary of the amortized cost and estimated fair value, including gross unrealized gains and losses, of available for sale, held to maturity and securities carried at fair value through income for the dates indicated:
(Dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
June 30, 2019
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
State and municipal securities
$
91,894


$
2,574


$
(5
)
 
$
94,463

Corporate bonds
11,017


643



 
11,660

U.S. Government and agency securities
61,578

 
267

 
(8
)
 
61,837

Commercial mortgage-backed securities
12,082

 
339

 

 
12,421

Residential mortgage-backed securities
175,853

 
2,572

 
(332
)
 
178,093

Commercial collateralized mortgage obligations
4,360

 
53

 

 
4,413

Residential collateralized mortgage obligations
185,089


1,471


(467
)
 
186,093

Total
$
541,873

 
$
7,919

 
$
(812
)
 
$
548,980

Held to maturity:
 
 
 
 
 
 
 
State and municipal securities
$
28,897


$
437


$

 
$
29,334

Securities carried at fair value through income:
 
 
 
 
 
 
 
State and municipal securities(1)
$
11,263


$


$


$
11,615

 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
State and municipal securities
$
99,780

 
$
1,266

 
$
(163
)
 
$
100,883

Corporate bonds
10,997

 
102

 
(65
)
 
11,034

U.S. Government and agency securities
61,122

 
82

 
(54
)
 
61,150

Commercial mortgage-backed securities
16,672

 
94

 

 
16,766

Residential mortgage-backed securities
188,058

 
417

 
(2,160
)
 
186,315

Residential collateralized mortgage obligations
202,422

 
315

 
(3,241
)
 
199,496

Total
$
579,051

 
$
2,276

 
$
(5,683
)
 
$
575,644

Held to maturity:
 
 
 
 
 
 
 
State and municipal securities
$
19,169

 
$

 
$
(33
)
 
$
19,136

Securities carried at fair value through income:
 
 
 
 
 
 
 
State and municipal securities(1)
$
11,503

 
$

 
$

 
$
11,361

____________________________
(1) 
Securities carried at fair value through income have no unrealized gains or losses at the balance sheet date as all changes in value have been recognized in the condensed consolidated statements of income. See Note 5 - Fair Value of Financial Instruments for more information.

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Table of Contents
ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements

Securities with unrealized losses at June 30, 2019, and December 31, 2018, aggregated by investment category and those individual securities that have been in a continuous unrealized loss position for less than 12 months and for 12 months or more were as follows:
(Dollars in thousands)
Less than 12 Months
 
12 Months or More
 
Total
June 30, 2019
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
$
1,489

 
$
(1
)
 
$
1,187

 
$
(4
)
 
$
2,676

 
$
(5
)
U.S. Government and agency securities
731

 
(8
)
 

 

 
731

 
(8
)
Residential mortgage-backed securities
907

 
(2
)
 
54,880

 
(330
)
 
55,787

 
(332
)
Residential collateralized mortgage obligations
7,358

 
(29
)
 
46,569

 
(438
)
 
53,927

 
(467
)
Total
$
10,485

 
$
(40
)
 
$
102,636

 
$
(772
)
 
$
113,121

 
$
(812
)
Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
$

 
$

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
$
13,101

 
$
(50
)
 
$
8,463

 
$
(113
)
 
$
21,564

 
$
(163
)
Corporate bonds
7,932

 
(65
)
 

 

 
7,932

 
(65
)
U.S. Government and agency securities
56,271

 
(54
)
 

 

 
56,271

 
(54
)
Residential mortgage-backed securities
18,836

 
(65
)
 
77,471

 
(2,095
)
 
96,307

 
(2,160
)
Residential collateralized mortgage obligations
14,711

 
(79
)
 
120,601

 
(3,162
)
 
135,312

 
(3,241
)
Total
$
110,851

 
$
(313
)
 
$
206,535

 
$
(5,370
)
 
$
317,386

 
$
(5,683
)
Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
$
13,921

 
$
(33
)
 
$

 
$

 
$
13,921

 
$
(33
)
At June 30, 2019, the Company had 44 individual securities that were in an unrealized loss position. The unrealized losses for each of the securities related to market interest rate changes. The Company has considered the current market for the securities in an unrealized loss position, as well as the severity and duration of the impairments, and expects that the value will recover. Management does not intend to sell these investments until the fair value exceeds amortized cost and it is more likely than not that the Company will not be required to sell debt securities before the anticipated recovery of the amortized cost basis of the security; thus, the impairment is determined not to be other-than-temporary.
The following table presents the amortized cost and fair value of securities available for sale and held to maturity at June 30, 2019, grouped by contractual maturity. Mortgage-backed securities and collateralized mortgage obligations, which do not have contractual payments due at a single maturity date, are shown separately. Actual maturities for mortgage-backed securities and collateralized mortgage obligations will differ from contractual maturities as a result of prepayments made on the underlying mortgages.
(Dollars in thousands)
Held to Maturity
 
Available for Sale
June 30, 2019
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
$

 
$

 
$
59,863

 
$
59,908

Due after one year through five years
13,687

 
13,784

 
24,594

 
25,037

Due after five years through ten years
10,000

 
10,328

 
75,818

 
78,645

Due after ten years
5,210

 
5,222

 
4,214

 
4,370

Commercial mortgage-backed securities

 

 
12,082

 
12,421

Residential mortgage-backed securities

 

 
175,853

 
178,093

Commercial collateralized mortgage obligations

 

 
4,360

 
4,413

Residential collateralized mortgage obligations

 

 
185,089

 
186,093

Total
$
28,897

 
$
29,334

 
$
541,873

 
$
548,980


16

Table of Contents
ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements

The following table presents carrying amounts of securities pledged as collateral for public deposits and repurchase agreements as of the dates presented.
(Dollars in thousands)
June 30, 2019
 
December 31, 2018
Carrying value of securities pledged to secure public deposits
$
312,971

 
$
364,055

Carrying value of securities pledged to repurchase agreements
40,500

 
48,847

Note 4 - Loans
Loans consisted of the following:
(Dollars in thousands)
June 30, 2019
 
December 31, 2018
Loans held for sale
$
58,408

 
$
52,210

Loans held for investment:
 
 
 
Loans secured by real estate:
 
 
 
Commercial real estate
$
1,219,470

 
$
1,228,402

Construction/land/land development
524,999

 
429,660

Residential real estate
651,988

 
629,714

Total real estate
2,396,457

 
2,287,776

Commercial and industrial
1,341,652

 
1,272,566

Mortgage warehouse lines of credit
224,939

 
207,871

Consumer
21,549

 
20,892

Total loans held for investment(1)
3,984,597

 
3,789,105

Less: Allowance for loan losses
36,683

 
34,203

Net loans held for investment
$
3,947,914

 
$
3,754,902

____________________________
(1) 
Includes net deferred loan fees of $3.5 million and $3.2 million at June 30, 2019, and December 31, 2018, respectively.
Included in total loans held for investment were $18.3 million and $18.6 million of commercial real estate loans for which the fair value option was elected as of June 30, 2019, and December 31, 2018, respectively. The Company mitigates the interest rate component of fair value risk on loans at fair value by entering into derivative interest rate contracts. See Note 5 - Fair Value of Financial Instruments for more information on loans for which the fair value option has been elected.
Credit quality indicators. As part of the Company's commitment to manage the credit quality of its loan portfolio, management annually updates and evaluates certain credit quality indicators, which include but are not limited to (i) weighted-average risk rating of the loan portfolio, (ii) net charge-offs, (iii) level of non-performing loans, (iv) level of classified loans, and (v) the general economic conditions in the states in which the Company operates. The Company maintains an internal risk rating system where ratings are assigned to individual loans based on assessed risk. Loan risk ratings are the primary indicator of credit quality for the loan portfolio and are continually evaluated to ensure they are appropriate based on currently available information.
The following is a summary description of the Company's internal risk ratings:
• Pass (1-6)
Loans within this risk rating are further categorized as follows:
Minimal risk (1)
Well-collateralized by cash equivalent instruments held by the Bank.
Moderate risk (2)
Borrowers with excellent asset quality and liquidity. Borrowers' capitalization and liquidity exceed industry norms. Borrowers in this category have significant levels of liquid assets and have a low level of leverage.
Better than average risk (3)
Borrowers with strong financial strength and excellent liquidity that consistently demonstrate strong operating performance. Borrowers in this category generally have a sizable net worth that can be converted into liquid assets within 12 months.
Average risk (4)
Borrowers with sound credit quality and financial performance, including liquidity. Borrowers are supported by sufficient cash flow coverage generated through operations across the full business cycle.

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Table of Contents
ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements

Marginally acceptable risk (5)
Loans generally meet minimum requirements for an acceptable loan in accordance with lending policy, but possess one or more attributes that cause the overall risk profile to be higher than the majority of newly approved loans.
Watch (6)
A passing loan with one or more factors that identify a potential weakness in the overall ability of the borrower to repay the loan. These weaknesses are generally mitigated by other factors that reduce the risk of delinquency or loss.
• Special Mention (7)
This grade is intended to be temporary and includes borrowers whose credit quality has deteriorated and is at risk of further decline.
• Substandard (8)
This grade includes "Substandard" loans under regulatory guidelines. Substandard loans exhibit a well-defined weakness that jeopardizes debt repayment in accordance with contractual agreements, even though the loan may be performing. These obligations are characterized by the distinct possibility that a loss may be incurred if these weaknesses are not corrected and repayment may be dependent upon collateral liquidation or secondary source of repayment.
• Doubtful (9)
This grade includes "Doubtful" loans under regulatory guidelines. Such loans are placed on nonaccrual status and repayment may be dependent upon collateral with no readily determinable valuation or valuations that are highly subjective in nature. Repayment for these loans is considered improbable based on currently existing facts and circumstances.
• Loss (0)
This grade includes "Loss" loans under regulatory guidelines. Loss loans are charged-off or written down when repayment is not expected.
The recorded investments in loans by credit quality indicator at June 30, 2019, and December 31, 2018, excluding loans held for sale, were as follows:
 
June 30, 2019
(Dollars in thousands)
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
1,188,742

 
$
12,803

 
$
17,925

 
$

 
$

 
$
1,219,470

Construction/land/land development
523,414

 
154

 
1,431

 

 

 
524,999

Residential real estate
643,039

 
1,122

 
7,827

 

 

 
651,988

Total real estate
2,355,195

 
14,079

 
27,183

 

 

 
2,396,457

Commercial and industrial
1,265,515

 
26,906

 
49,231

 

 

 
1,341,652

Mortgage warehouse lines of credit
224,939

 

 

 

 

 
224,939

Consumer
21,393

 

 
156

 

 

 
21,549

Total loans held for investment
$
3,867,042

 
$
40,985

 
$
76,570

 
$

 
$

 
$
3,984,597

 
December 31, 2018
(Dollars in thousands)
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
1,206,194

 
$
3,101

 
$
19,107

 
$

 
$

 
$
1,228,402

Construction/land/land development
426,770

 
157

 
2,733

 

 

 
429,660

Residential real estate
617,996

 
1,142

 
10,576

 

 

 
629,714

Total real estate
2,250,960

 
4,400

 
32,416

 

 

 
2,287,776

Commercial and industrial
1,190,718

 
34,964

 
46,884

 

 

 
1,272,566

Mortgage warehouse lines of credit
207,871

 

 

 

 

 
207,871

Consumer
20,712

 

 
180

 

 

 
20,892

Total loans held for investment
$
3,670,261

 
$
39,364

 
$
79,480