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Origin Bank(OBK) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Origin Bancorp, Inc.'s unaudited consolidated financial statements for Q3 and YTD 2023, detailing financial position, performance, and cash flows with explanatory notes Consolidated Balance Sheets Total assets slightly increased to $9.73 billion by Q3 2023, driven by loan growth and deposit increases, while FHLB advances decreased and equity rose Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $9,733,303 | $9,686,067 | | Total Cash and Cash Equivalents | $305,278 | $358,972 | | Total Securities | $1,308,401 | $1,659,127 | | Loans, net | $7,472,886 | $7,002,861 | | Total Deposits | $8,374,488 | $7,775,702 | | FHLB advances and other borrowings | $12,213 | $639,230 | | Total Stockholders' Equity | $998,945 | $949,943 | Consolidated Statements of Income Net income for Q3 2023 significantly increased to $24.3 million, driven by lower credit loss provisions and higher noninterest income, despite a decrease in net interest income Key Income Statement Data (in thousands, except per share amounts) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $74,130 | $78,523 | $226,568 | $190,529 | | Provision for Credit Losses | $3,515 | $16,942 | $14,018 | $20,067 | | Total Noninterest Income | $18,119 | $13,723 | $50,139 | $43,845 | | Total Noninterest Expense | $58,663 | $56,241 | $174,310 | $143,165 | | Net Income | $24,313 | $16,243 | $70,375 | $58,237 | | Diluted EPS | $0.79 | $0.57 | $2.28 | $2.30 | Consolidated Statements of Comprehensive Income (Loss) Comprehensive income improved significantly to $4.5 million in Q3 2023, primarily due to a smaller other comprehensive loss compared to the prior year Comprehensive Income (Loss) Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $24,313 | $16,243 | $70,375 | $58,237 | | Other Comprehensive Loss, net of tax | $(19,850) | $(59,254) | $(12,854) | $(180,962) | | Comprehensive Income (Loss) | $4,463 | $(43,011) | $57,521 | $(122,725) | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $998.9 million by Q3 2023, primarily driven by net income, partially offset by comprehensive loss and dividends - Total stockholders' equity increased by $49.0 million during the first nine months of 202329 - Key changes for the nine months ended September 30, 2023 include: - Net Income: +$70.4 million - Other Comprehensive Loss: -$12.9 million - Dividends Declared: -$14.1 million - Stock-based compensation and other activities: +$5.6 million29 Consolidated Statements of Cash Flows Net cash provided by operating activities was $100.5 million, while investing and financing activities resulted in net cash usage, leading to an overall decrease in cash and cash equivalents Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $100,475 | $93,811 | | Net Cash Used in Investing Activities | $(132,772) | $(276,658) | | Net Cash Used in Financing Activities | $(21,397) | $(222,301) | | Net Decrease in Cash | $(53,694) | $(405,148) | Condensed Notes to Consolidated Financial Statements These notes provide detailed accounting policies and financial data, covering credit losses, fair value, loan portfolios, borrowings, capital adequacy, and merger impacts Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 and YTD 2023 financial performance, highlighting net income growth, net interest margin pressure, credit quality, balance sheet changes, and strong liquidity and capital 2023 Third Quarter Highlights Q3 2023 highlights include significant net income growth, influenced by a loss on securities sale and a gain on an equity security, with increased book value per share - Net income for Q3 2023 was $24.3 million, an increase of 49.7% YoY, with diluted EPS of $0.79226 - A strategic sale of $181.9 million in AFS securities resulted in a $7.2 million loss, negatively impacting EPS by $0.18226 - A $10.1 million positive valuation adjustment on a non-marketable equity security positively impacted EPS by $0.26226 Results of Operations Q3 2023 net interest income decreased due to rising deposit costs, but net income benefited from lower credit loss provisions and higher noninterest income, while YTD net interest income grew Net Interest Margin (NIM) - FTE | Period | NIM-FTE | Change (bps) | | :--- | :--- | :--- | | Q3 2023 | 3.14% | -54 bps (YoY) | | YTD 2023 | 3.24% | -4 bps (YoY) | - In Q3 2023, a strategic sale of AFS securities with a book value of $181.9 million resulted in a $7.2 million loss234247 - Proceeds were used to pay down FHLB advances, with an estimated positive forward impact to NIM of 11 basis points234247 - Q3 2023 noninterest income was boosted by a $10.1 million gain from a positive valuation adjustment on a non-marketable equity security248 - The provision for credit losses decreased significantly to $3.5 million in Q3 2023 from $16.9 million in Q3 2022, as the prior year included a large provision related to the BTH merger242 Financial Condition Total assets reached $9.73 billion, driven by loan growth funded by increased deposits, while nonperforming loans rose and the allowance for credit losses remained stable Loan Portfolio Composition (in thousands) | Loan Type | Sep 30, 2023 | Dec 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Real Estate | $5,200,816 | $4,727,841 | 10.0% | | Commercial and Industrial | $2,058,073 | $2,051,161 | 0.3% | | Total LHFI | $7,568,063 | $7,090,022 | 6.7% | Credit Quality Ratios | Ratio | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Nonperforming LHFI to Total LHFI | 0.42% | 0.14% | | ALCL to Total LHFI | 1.26% | 1.23% | | ALCL to Nonperforming LHFI | 301.12% | 876.87% | - Total deposits increased by $598.8 million (7.7%) since year-end 2022, driven by a $663.8 million increase in brokered time deposits and a $255.0 million increase in money market deposits, offset by a $473.8 million decrease in noninterest-bearing demand deposits313 - Estimated uninsured and uncollateralized deposits decreased to 32.8% of total deposits from 44.1% at year-end 2022318 Liquidity and Capital Resources The company maintains strong liquidity with $5.09 billion in available sources and robust capital ratios significantly exceeding regulatory minimums - Total primary and secondary liquidity sources were $5.09 billion at September 30, 2023331 - The company has borrowing capacity of $2.27 billion from the FHLB and $1.69 billion from the FRB discount window320330 Origin Bancorp, Inc. Regulatory Capital Ratios | Ratio | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Common Equity Tier 1 | 11.46% | 10.93% | | Tier 1 Capital | 11.64% | 11.12% | | Total Capital | 14.61% | 14.23% | | Tier 1 Leverage | 10.00% | 9.66% | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk using simulation models, showing sensitivity to rate changes, and has completed its transition from LIBOR to SOFR with no material impact Interest Rate Sensitivity Analysis (12-Month Horizon) | Change in Interest Rates (bps) | % Change in Net Interest Income | % Change in Fair Value of Equity | | :--- | :--- | :--- | | +400 | +9.6% | -7.1% | | +200 | +5.0% | -3.5% | | +100 | -1.2% | -3.9% | | -100 | +0.8% | +2.8% | - The company has completed its transition away from LIBOR, converting remaining instruments to SOFR-based rates effective July 1, 2023, with no material financial impact358 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period359 - No changes in internal control over financial reporting occurred during Q3 2023 that materially affected, or are reasonably likely to materially affect, internal controls360 Part II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal actions, none of which are expected to have a material adverse effect on its financial condition or liquidity - The company is party to various legal actions in the ordinary course of business, but management does not expect any to have a material adverse effect on its financial condition205361 Item 1A. Risk Factors No material changes were reported to the risk factors previously disclosed in the 2022 Form 10-K or prior 2023 quarterly reports - No material changes were made to the risk factors previously disclosed in the 2022 Form 10-K or prior 2023 quarterly reports363 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities The company has an authorized $50 million stock repurchase program, but no shares were repurchased during Q3 2023 - A stock repurchase program for up to $50 million was authorized in July 2022364 - No stock repurchases were made during the quarter ended September 30, 2023365 Item 3. Defaults Upon Senior Securities Not applicable Item 4. Mine Safety Disclosures Not applicable Item 5. Other Information No directors or executive officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2023 - No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q3 2023368 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and CEO/CFO certifications Signatures