Origin Bancorp, Inc. Reports Earnings For Fourth Quarter and 2021 Full Year

Origin Bancorp, Inc. (Nasdaq: OBNK) (“Origin” or the “Company”), the holding company for Origin Bank (the “Bank”), today announced record net income of $28.3 million, or $1.20 diluted earnings per share for the quarter ended December 31, 2021, compared to net income of $27.0 million, or $1.14 diluted earnings per share for the quarter ended September 30, 2021, and net income of $17.6 million, or $0.75 diluted earnings per share for the quarter ended December 31, 2020. Pre-tax, pre-provision (“PTPP”) earnings for the quarter were $30.5 million, a 4.2% increase from the quarter ended September 30, 2021, and a 7.8% increase from the fourth quarter of 2020. Net income for the year ended December 31, 2021, was at a record high of $108.5 million, reflecting diluted earnings per share for the year ended December 31, 2021, of $4.60, representing an increase of $3.05, or 196.8%, from diluted earnings per share of $1.55 for the year ended December 31, 2020.

“Origin Bancorp delivered another strong quarter and closed out a very dynamic year,” said Drake Mills, chairman, president and CEO of Origin Bancorp, Inc. “We remain focused on core, organic growth and our team performed well with 23% annualized growth on loans excluding PPP and mortgage warehouse this quarter. We have been and will continue to be purposeful in our strategy and efforts to provide value to our employees, customers, communities, and shareholders.”

Financial Highlights

  • Net income was $28.3 million for the quarter ended December 31, 2021, achieving a historic high compared to $27.0 million for the linked quarter and $17.6 million for the quarter ended December 31, 2020.
  • Total loans held for investment (“LHFI”) at December 31, 2021, excluding PPP and mortgage warehouse lines of credit, were $4.50 billion, reflecting a $241.5 million, or 5.7% increase, compared to the linked quarter, and a $404.2 million, or 9.9% increase compared to December 31, 2020.
  • Total deposits grew $411.9 million, or 6.7%, to $6.57 billion at December 31, 2021, compared to $6.16 billion at September 30, 2021, and increased $819.4 million, or 14.2%, compared to December 31, 2020. Noninterest- bearing deposits grew $183.4 million, or 9.3%, compared to September 30, 2021, and $555.9 million, or 34.6%, compared to December 31, 2020, and represented 32.9% of total deposits at December 31, 2021.
  • Average balances of total securities for the quarter ended December 31, 2021, were $1.50 billion, reflecting a $371.4 million, or 32.8% increase compared to the linked quarter, and a $550.7 million, or 57.7% increase, compared to the quarter ended December 31, 2020. Total securities were $1.53 billion at December 31, 2021, compared to $1.54 billion at September 30, 2021, and increased $480.6 million, or 45.6%, compared to December 31, 2020.
  • Provision for credit losses was a net benefit of $2.6 million for the quarter ended December 31, 2021, compared to a net benefit of $3.9 million for the linked quarter and a provision expense of $6.3 million for the quarter ended December 31, 2020.
  • Annualized returns on average stockholder’s equity and average assets were 15.70% and 1.49%, respectively, for the quarter ended December 31, 2021, compared to 15.21% and 1.43%, respectively for the linked quarter, and 10.92% and 0.97%, respectively, for the quarter ended December 31, 2020.
  • On December 31, 2021, the Company acquired the remaining 62% equity interest in The Lincoln Agency bringing the Company’s total ownership to 100%. Additionally, the Company acquired substantially all assets of the Pulley-White Insurance Agency, Inc. on December 31, 2021, for $2.2 million in cash and $2.2 million in Company common stock.

Results of Operations for the Three Months Ended December 31, 2021

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended December 31, 2021, was $54.2 million, an increase of $1.6 million, or 3.1%, compared to the linked quarter. The increase was primarily due to a $1.2 million increase in interest income earned on total investment securities and a $1.2 million increase in interest income earned on commercial real estate loans, offset by decreases of $873,000 and $577,000 in interest earned on residential real estate loans and mortgage warehouse lines of credit, respectively. The increase in interest income earned on total securities was primarily due to a $371.4 million increase in the average balance of total securities caused by a shift in balance sheet composition. The increase in interest income earned on commercial real estate loans was primarily driven by a $106.3 million increase in the average balance of total commercial real estate loans. The decrease in interest earned on residential real estate loans was primarily due to a decline in interest rates, which contributed $595,000 to the $873,000 decline in interest income on residential real estate loans. The decrease in interest earned on mortgage warehouse lines of credit was caused primarily by a decrease of $82.9 million in average mortgage warehouse lines of credit loan balances, as the outstanding balances of mortgage warehouse lines of credit continued to normalize.

The yield earned on interest-earning assets for the quarter ended December 31, 2021, was 3.35%, an increase of two basis points compared to the linked quarter and a decrease of 12 basis points compared to the quarter ended December 31, 2020. Excluding PPP loans, the yield earned on interest-earning assets was 3.21%, a four basis point decrease compared to the linked quarter. The rate paid on total interest-bearing liabilities for the quarter ended December 31, 2021, was 0.51%, representing a two basis point decrease from the linked quarter, and a 13 basis point decrease compared to the quarter ended December 31, 2020.

The fully tax-equivalent net interest margin (“NIM”) was 3.06% for the quarter ended December 31, 2021, a four basis point increase and a one basis point decrease from the linked quarter and the quarter ended December 31, 2020, respectively. Excluding PPP loans, the fully tax-equivalent NIM was 2.92%, a two basis point decrease and a 25 basis point decrease from the linked quarter and the quarter ended December 31, 2020, respectively. The decrease in fully tax-equivalent NIM, excluding PPP loans, was primarily due to a shift in balance sheet composition as PPP loan balances continued to be forgiven by the Small Business Administration (“SBA”) and mortgage warehouse loan volume continued to normalize, along with the increase in deposits, causing a surge in liquidity which was primarily invested in comparatively lower-yielding securities.

Credit Quality

The Company recorded a credit loss provision net benefit of $2.6 million during the quarter ended December 31, 2021, compared to a credit loss provision net benefit of $3.9 million recorded during the linked quarter. The release of credit loss provision reflects the continued improvement in forecasted economic conditions at December 31, 2021, and stable credit loss metrics. While economic forecasts have improved, uncertainty remains due to risks related to the resurgence or lingering effects of COVID-19, rising inflation and labor pressures, as well as continued global supply-chain disruptions.

Credit metrics remained stable for the quarter ended December 31, 2021, compared to the linked quarter. The allowance for loan credit losses to nonperforming LHFI decreased to 259.35% at December 31, 2021, compared to 284.86% at September 30, 2021. The Company’s nonperforming LHFI and quarterly net charge-offs were stable, compared to the linked quarter. Classified loans declined $6.2 million at December 31, 2021, compared to September 30, 2021, and represented 1.35% of LHFI, excluding PPP loans, at December 31, 2021, compared to 1.52% at September 30, 2021.

Noninterest Income

Noninterest income for the quarter ended December 31, 2021, was $16.7 million, an increase of $778,000, or 4.9%, from the linked quarter. The increase from the linked quarter was primarily driven by an increase of $5.4 million in other noninterest income, offset by decreases of $3.0 million, $1.0 million, and $625,000 in limited partnership investment income, swap fee income, and insurance commission and fee income, respectively.

The $5.4 million increase in other noninterest income was primarily due to the Company’s acquisition of the remaining 62% equity interest in The Lincoln Agency. The Company remeasured the previously held equity method investment to its fair value, resulting in recognition of a gain of $5.2 million in other noninterest income. The $3.0 million decrease in limited partnership investment income was primarily due to a $3.1 million valuation increase of the investments in two of the limited partnership funds during the quarter ended September 30, 2021, with no such increase during the current quarter. The $1.0 million decrease in swap fee income was primarily driven by $727,000 in swap commission fees earned on one new swap contract executed during the quarter ended September 30, 2021, combined with an early termination fee incurred during the quarter ended December 31, 2021. To benefit future income, the Company elected to unwind a one-way swap during the quarter ended December 31, 2021, and paid an early termination fee of $296,000. The decrease in insurance commission and fee income was caused by the seasonality of policy renewals.

Noninterest Expense

Noninterest expense for the quarter ended December 31, 2021, was $40.3 million, an increase of $1.2 million, compared to the linked quarter. This increase was primarily driven by an increase of $1.1 million in salaries and employee benefit expenses, primarily due to a $893,000 increase in our incentive compensation bonus during the quarter ended December 31, 2021, primarily due to the growth in loan production.

Income Taxes

The effective tax rate was 14.6% during the quarter ended December 31, 2021, compared to 18.8% during the linked quarter and 20.2% during the quarter ended December 31, 2020. The decline was primarily due the tax impact of the exercise of stock options and vesting of stock awards during the period.

Financial Condition

Loans

  • Total LHFI increased $44.0 million compared to the linked quarter and decreased $493.4 million compared to December 31, 2020.
  • Total LHFI at December 31, 2021, were $4.50 billion, excluding PPP and mortgage warehouse lines of credit, reflecting a $241.5 million, or 5.7% increase, compared to the linked quarter and a $404.2 million, or 9.9% increase, compared to December 31, 2020.
  • PPP loans, net of deferred fees and costs, totaled $105.8 million at December 31, 2021, a decrease of $111.2 million compared to the linked quarter and a decrease of $440.8 million compared to December 31, 2020. Net deferred loan fees and costs on PPP loans were $3.0 million, $6.3 million, and $9.6 million, at December 31, 2021, September 30, 2021, and December 31, 2020, respectively.
  • Mortgage warehouse lines of credit totaled $627.1 million at December 31, 2021, a decrease of $86.3 million compared to the linked quarter and a decrease of $456.9 million compared to December 31, 2020, falling within the expected range of 10% to 12% of total LHFI by year-end 2021.
  • Average LHFI decreased $56.1 million, compared to the linked quarter, and decreased $375.6 million compared to the quarter ended December 31, 2020.
  • Average LHFI, excluding PPP and mortgage warehouse lines of credit, increased $144.0 million, compared to the linked quarter, and increased $333.3 million compared to the quarter ended December 31, 2020.

Total LHFI at December 31, 2021, were $5.23 billion, reflecting an increase of 0.8%, compared to the linked quarter decrease of 8.6%, compared to December 31, 2020. The increase in LHFI compared to the linked quarter, was primarily driven by increases in commercial and industrial loans excluding PPP and commercial real estate loans, offset by decreases in PPP loans and mortgage warehouse lines of credit, respectively. PPP outstanding loan balances continued to decline primarily through the SBA’s forgiveness process and outstanding balances of mortgage warehouse lines of credit continued to normalize during the current period.

Securities 

  • Total securities remained relatively unchanged compared to the linked quarter and increased $480.6 million, compared to December 31, 2020.
  • Average securities increased $371.4 million, compared to the linked quarter, and increased $550.7 million compared to the quarter ended December 31, 2020.

Total securities at December 31, 2021, were $1.53 billion, decreasing slightly from the linked quarter, and increasing 45.6%, compared to December 31, 2020. The increase in securities during 2021 reflects a shift in balance sheet composition as liquidity surged due to declines in PPP and mortgage warehouse lines of credit loan balances, as a result of the SBA’s forgiveness process and the normalization of mortgage warehouse lines of credit balances, along with the increase in deposits.

Goodwill & Intangibles

On December 31, 2021, the Company acquired the remaining 62% equity interest in The Lincoln Agency for $5.3 million in cash and $5.3 million in Company common stock, bringing the Company’s total ownership to 100%. Additionally, the Company acquired substantially all assets of the Pulley-White Insurance Agency, Inc. on December 31, 2021, for $2.2 million in cash and $2.2 million in Company common stock.

  • The Company recognized a $14.1 million and $7.6 million increase, respectively, in intangible assets and goodwill in conjunction with the acquisitions.

Deposits

  • Total deposits increased $411.9 million and $819.4 million compared to the linked quarter and December 31, 2020, respectively.
  • Interest-bearing deposits grew $263.4 million, or 7.3%, compared to September 30, 2021, and $385.1 million, or 11.1%, compared to December 31, 2020.
  • Noninterest-bearing deposits grew $183.4 million, or 9.3%, compared to September 30, 2021, and $555.9 million, or 34.6%, compared to December 31, 2020.

Business depositors drove increases of $168.1 million and $142.2 million in noninterest-bearing demand and money market deposits compared to the linked quarter. Consumer depositors drove an additional increase of $104.6 million in total deposits compared to the linked quarter. Business depositors drove an increase of $890.8 million in total deposits compared to December 31, 2020.

For the quarter ended December 31, 2021, average noninterest-bearing deposits as a percentage of total average deposits were 33.6%, compared to 31.7% for the linked quarter, and 28.7% for the quarter ended December 31, 2020.

Borrowings

  • Average Federal Home Loan Bank (“FHLB”) advances and other borrowings for the quarter ended December 31, 2021, increased by $3.8 million or 1.4%, compared to the linked quarter, and decreased by $79.8 million or 23.0%, compared to the quarter ended December 31, 2020.

The changes in average FHLB advances and other borrowings from both the linked quarter and from the quarter ended December 31, 2020, were driven by short-term borrowing variations during the respective periods as a result of liquidity management.

Stockholder’s Equity

Stockholders’ equity was $730.2 million at December 31, 2021, an increase of $24.5 million compared to $705.7 million at September 30, 2021, and an increase of $83.1 million compared to $647.2 million at December 31, 2020. The increase from the linked quarter was primarily due to net income for the quarter of $28.3 million, combined with a $7.5 million stock issuance for the insurance agency acquisitions, discussed earlier. These increases were partially offset by other comprehensive loss, net of tax and the quarterly dividend declared during the quarter ended December 31, 2021. The increase from December 31, 2020, was primarily driven by net income retained during the intervening period, and partially offset by the other comprehensive loss, net of tax.

Conference Call

Origin will hold a conference call to discuss its fourth quarter and 2021 full year results on Thursday, January 27, 2022, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). To participate in the live conference call, please dial (844) 695-5516; International: (412) 902-6750 and request to be joined into the Origin Bancorp, Inc. (OBNK) call. A simultaneous audio-only webcast may be accessed via Origin’s website at www.origin.bank under the Investor Relations, News & Events, Events & Presentations link or directly by visiting: https://services.choruscall.com/mediaframe/webcast.html?webcastid=yG9FTkGk.

If you are unable to participate during the live webcast, the webcast will be archived on the Investor Relations section of Origin’s website at www.origin.bank, under Investor Relations, News & Events, Events & Presentations.

About Origin Bancorp, Inc.

Origin is a financial holding company headquartered in Ruston, Louisiana. Origin’s wholly-owned bank subsidiary, Origin Bank, was founded in 1912. Deeply rooted in Origin’s history is a culture committed to providing personalized, relationship banking to its clients and communities. Origin provides a broad range of financial services to businesses, municipalities, high net-worth individuals and retail clients. Origin currently operates 44 banking centers located from Dallas/ Fort Worth and Houston, Texas across North Louisiana and into Mississippi. For more information, visit www.origin.bank.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information regarding Origin’s future financial performance, business and growth strategy, projected plans and objectives, including the Company’s loan loss reserves and allowance for credit losses related to the COVID-19 pandemic and any expected purchases of its outstanding common stock, and related transactions and other projections based on macroeconomic and industry trends, including expectations regarding and efforts to respond to the COVID-19 pandemic and changes to interest rates by the Federal Reserve and the resulting impact on Origin’s results of operations, estimated forbearance amounts and expectations regarding the Company’s liquidity, including in connection with advances obtained from the FHLB, which are all subject to change and may be inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such changes may be material. Such forward-looking statements are based on various facts and derived utilizing important assumptions and current expectations, estimates and projections about Origin and its subsidiaries, any of which may change over time and some of which may be beyond Origin’s control. Statements or statistics preceded by, followed by or that otherwise include the words “assumes,” “anticipates,” “believes,” “estimates,” “expects,” “foresees,” “intends,” “plans,” “projects,” and similar expressions or future or conditional verbs such as “could,” “may,” “might,” “should,” “will,” and “would” and variations of such terms are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. Further, certain factors that could affect Origin’s future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: the continuing duration and impacts of the COVID-19 global pandemic and continuing development and distribution of COVID-19 vaccines, as well as other efforts to contain the virus’s transmission, including the effect of these factors and developments on Origin’s business, customers, and economic conditions generally, as well as the impact of the actions taken by governmental authorities to address the impact of COVID-19 on the United States economy, including any economic stimulus legislation; deterioration of Origin’s asset quality; factors that can impact the performance of Origin’s loan portfolio, including real estate values and liquidity in Origin’s primary market areas; the financial health of Origin’s commercial borrowers and the success of construction projects that Origin finances; changes in the value of collateral securing Origin’s loans; Origin’s ability to anticipate interest rate changes and manage interest rate risk; the effectiveness of Origin’s risk management framework and quantitative models; the risk of widespread inflation; Origin’s inability to receive dividends from Origin Bank and to service debt, pay dividends to Origin’s common stockholders, repurchase Origin’s 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 Origin’s primary market areas; changes in Origin’s operation or expansion strategy or Origin’s ability to prudently manage its growth and execute its strategy; changes in management personnel; Origin’s ability to maintain important customer relationships, reputation or otherwise avoid liquidity risks; increasing costs as Origin grows deposits; operational risks associated with Origin’s business; volatility and direction of market interest rates; increased competition in the financial services industry, particularly from regional and national institutions; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which Origin operates and in which its loans are concentrated; an increase in unemployment levels and slowdowns in economic growth; Origin’s level of nonperforming assets and the costs associated with resolving any problem loans including litigation and other costs; the credit risk associated with the substantial amount of commercial real estate, construction and land development, and commercial loans in Origin’s loan portfolio; changes in laws, rules, regulations, interpretations or policies relating to financial institutions, and potential expenses associated with complying with such regulations; periodic changes to the extensive body of accounting rules and best practices; further government intervention in the U.S. financial system; 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; Origin’s ability to comply with applicable capital and liquidity requirements, including its ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; changes in the utility of Origin’s non-GAAP liquidity measurements and its underlying assumptions or estimates; uncertainty regarding the transition away from the London Interbank Offered Rate (“LIBOR”) and the impact of any replacement alternatives such as the Secured Overnight Financing Rate (“SOFR”) on Origin’s business; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies and similar organizations; natural disasters and adverse weather events, acts of terrorism, an outbreak of hostilities, regional or national protests and civil unrest (including any resulting branch closures or property damage), widespread illness or public health outbreaks or other international or domestic calamities, and other matters beyond Origin’s control; and system failures, cybersecurity threats or security breaches and the cost of defending against them. For a discussion of these and other risks that may cause actual results to differ from expectations, please refer to the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Origin’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and any updates to those sections set forth in Origin’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if Origin’s underlying assumptions prove to be incorrect, actual results may differ materially from what Origin anticipates. 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 Origin does 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 arise from time to time, and it is not possible for Origin to predict those events or how they may affect Origin. In addition, Origin cannot assess the impact of each factor on Origin’s 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. Furthermore, many of these risks and uncertainties are currently amplified by, may continue to be amplified by or may, in the future, be amplified by the COVID-19 pandemic and the impact of varying governmental responses that affect Origin’s customers and the economies where they operate. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Origin or persons acting on Origin’s behalf may issue. Annualized, pro forma, adjusted, projected, and estimated numbers are used for illustrative purposes only, are not forecasts, and may not reflect actual results.

Contact:

Chris Reigelman, Origin Bancorp, Inc.

318-497-3177 / chris@origin.bank