Origin Bancorp, Inc. — 2023 Form 10-K
Business context and reporting period. This filing covers the fiscal year ended December 31, 2023, with comparisons primarily to 2022; it reports annual results, not standalone fourth-quarter results. Origin is a Louisiana-based financial holding company operating primarily through Origin Bank, a community bank serving Texas, Louisiana and Mississippi. At year-end, it had over 60 locations, $9.72 billion in assets, $7.66 billion in loans held for investment (LHFI), $8.25 billion in deposits and $1.06 billion in stockholders’ equity. In early 2024, the company announced entry into South Alabama and the Florida Panhandle.
Financial results and condition
| Metric | 2023 | 2022 |
|---|---|---|
| Net income | $83.8 million | $87.7 million |
| Diluted earnings per share | $2.71 | $3.28 |
| Net interest income | $299.6 million | $275.3 million |
| Net interest margin, fully tax-equivalent | 3.23% | 3.42% |
| Provision for credit losses | $16.8 million | $24.7 million |
| Noninterest income | $58.3 million | $57.3 million |
| Noninterest expense | $235.2 million | $200.4 million |
| Operating cash flow | $129.9 million | $145.6 million |
- Earnings and margins: Net interest income rose 8.8%, but net income declined 4.5%. Higher rates lifted asset yields but deposit and borrowing costs rose faster: the cost of interest-bearing deposits increased to 3.21% from 0.72%. NIM-FTE fell 19 basis points. Return on average assets was 0.84% and return on average equity was 8.38%, down from 1.01% and 10.81%, respectively.
- Revenue and expenses: Noninterest income was nearly flat. A $10.1 million gain from a fair-value adjustment to an equity investment partly offset $11.6 million in net securities-sale losses and lower mortgage banking revenue. Noninterest expense rose 17.4%, reflecting compensation, occupancy, amortization and higher regulatory assessments; 2023 had no comparable merger-related expense, versus $6.2 million in 2022.
- Loans and credit: LHFI grew 8.1% to $7.66 billion; real estate loans were 68.5% of the portfolio. The allowance for loan credit losses increased to $96.9 million, or 1.26% of LHFI, from $87.2 million, or 1.23%. Net charge-offs rose to $7.8 million from $4.6 million. Nonperforming LHFI increased to $30.1 million from $9.9 million, and the nonperforming-loan ratio rose to 0.39% from 0.14%. Management attributed much of the increase to two commercial and industrial relationships and residential loans; specified government guarantees and collateral mitigated some exposure.
- Deposits, liquidity and debt: Deposits increased 6.1% to $8.25 billion, but noninterest-bearing demand deposits fell $562.8 million; brokered time deposits increased $439.6 million. Estimated uninsured deposits were $3.58 billion, with $2.73 billion uninsured and uncollateralized. Cash and cash equivalents were $280.4 million. FHLB advances, repurchase obligations and other borrowings fell to $83.6 million from $639.2 million; subordinated debt was $194.3 million. Available FHLB borrowing capacity was $2.01 billion, and discount-window availability was $1.42 billion; neither line had discount-window borrowings at year-end. Management stated it believed liquidity was sufficient.
- Capital and securities: Origin Bank’s year-end CET1, total risk-based capital and leverage ratios were 11.95%, 13.92% and 10.45%, respectively; it was classified as well capitalized. AFS securities were $1.25 billion, with $154.0 million in pre-tax net unrealized losses. Accumulated other comprehensive loss improved to $121.0 million from $159.9 million.
Material changes versus 2022
- Net income and diluted EPS declined, despite higher net interest income, as sharply higher funding costs, increased operating expense and securities-sale losses weighed on results.
- Loans grew while the securities portfolio contracted: total securities decreased 23.3% to $1.27 billion. Deposits rose, but their mix shifted toward interest-bearing and brokered balances, and funding costs increased substantially.
- Credit measures weakened: nonperforming LHFI more than tripled and net charge-offs increased, although the provision for credit losses declined, partly because 2022 included a $14.9 million BTH-merger provision on non-PCD loans.
- Borrowings decreased materially as the company used deposits and proceeds from securities sales to reduce FHLB advances. Assets were broadly flat at $9.72 billion, up 0.4% year over year.
Outlook, commentary and risks
- The filing provides no formal earnings or revenue guidance. Management expected total assets to exceed $10 billion during 2024. Reaching that threshold could trigger additional regulatory requirements and costs, including direct CFPB examination and loss of the debit interchange exemption, subject to applicable timing rules.
- Management described securities sales as strategic balance-sheet actions. In the third quarter, it sold $181.9 million of AFS securities at a $7.2 million loss to repay FHLB advances, estimating an 11-basis-point annualized forward NIM-FTE benefit and a 1.7-year earn-back period. In December, it sold $78.9 million at a $4.6 million loss to support loan growth, estimating a 3–5-basis-point forward benefit and a 1.1–1.9-year earn-back period. These are management estimates, not guaranteed outcomes.
- The company recognized a $1.8 million MSR impairment and planned to sell approximately $17.4 million of mortgage servicing rights tied to $1.39 billion of unpaid principal balance, subject to a definitive agreement and closing conditions.
- Key risks include deposit competition and funding costs, interest-rate and securities valuation exposure, deterioration in commercial real estate or other credit, geographic concentration in Texas, Louisiana and Mississippi, and operational, cyber, regulatory and disaster risks. The filing notes elevated rates can pressure borrowers and that higher expenses may follow crossing the $10 billion asset threshold.
- Management did not expect ordinary-course legal proceedings, individually or collectively, to materially adversely affect consolidated financial position or results, while acknowledging outcomes remain uncertain. The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting; no material cybersecurity incident was reported.
Important facts for investors to verify
- Whether deposit retention and mix stabilize, particularly noninterest-bearing balances and reliance on brokered time deposits, and how deposit pricing affects NIM.
- Whether rising nonperforming loans, past-due loans and net charge-offs lead to further allowance or provision increases; review commercial and industrial exposures and CRE concentrations.
- How much of the AFS portfolio’s unrealized loss could become realized under liquidity or strategic needs, and whether the securities-sale benefits meet management’s estimated earn-back periods.
- Whether the proposed MSR sale closes on stated terms and how mortgage banking results develop after the impairment and planned disposition.
- The timing and financial impact of crossing $10 billion in assets, including regulatory compliance costs and any reduction in debit interchange income.