OBNK - Origin Bancorp Inc. Reports Earnings For Third-Quarter 2021

RUSTON, La., Oct. 27, 2021 (GLOBE NEWSWIRE) -- Origin Bancorp, Inc. (Nasdaq: OBNK) ("Origin" or the "Company"), the holding company for Origin Bank (the "Bank"), today announced net income of $27.0 million for the quarter ended September 30, 2021, or $1.14 diluted earnings per share, compared to net income of $27.7 million for the quarter ended June 30, 2021, or $1.17 diluted earnings per share. Net income was $13.1 million, or $0.56 diluted earnings per share for the quarter ended September 30, 2020. Pre-tax, pre-provision earnings for the quarter were $29.3 million, a 1.4% increase on a linked quarter basis, and a 2.1% decrease from the third quarter of 2020.

“Origin Bancorp delivered another strong quarter of earnings as our bankers remained focused on the fundamental core aspects of our business,” said Drake Mills, chairman, president and CEO of Origin Bancorp, Inc. “I’m very pleased with the 9% annualized growth on loans excluding PPP and mortgage warehouse. I’m also proud to announce that we have entered into an agreement to acquire The Lincoln Agency, an insurance agency operating out of North Louisiana. This acquisition provides the opportunity to augment noninterest income and create additional long-term value for our company. As the economic outlook continues to improve, Origin is in a position of strength to drive value for our employees, customers, communities and shareholders.”

Financial Highlights

• Total LHFI at September 30, 2021, excluding PPP and mortgage warehouse lines of credit, were $4.26 billion, reflecting a $95.9 million or 2.3% increase compared to the linked quarter, and an increase of $214.2 million, or 5.3% compared to September 30, 2020. Total LHFI, excluding PPP and mortgage warehouse lines of credit, grew at an annualized rate of 9.2% during the current quarter.
• Total securities grew $512.4 million, or 50.1%, to $1.54 billion at September 30, 2021, compared to $1.02 billion at June 30, 2021, and increased $687.9 million, or 81.2%, compared to September 30, 2020.
• Total deposits grew $130.4 million, or 2.2%, to $6.16 billion at September 30, 2021, compared to $6.03 billion at June 30, 2021, and increased $222.8 million, or 3.8%, compared to September 30, 2020. Noninterest-bearing deposits grew $119.1 million, or 6.4%, compared to June 30, 2021, and $380.7 million, or 23.8%, compared to September 30, 2020.
• Provision for credit losses was a net benefit of $3.9 million for the quarter ended September 30, 2021, compared to a net benefit of $5.6 million for the linked quarter and a provision expense of $13.6 million for the quarter ended September 30, 2020.
• Cost of total deposits was 0.21% for the quarter ended September 30, 2021, compared to 0.22% for the linked quarter and 0.42% for the quarter ended September 30, 2020.
• Nonperforming LHFI to total LHFI improved to 0.47% at September 30, 2021, compared to 0.57% at June 30, 2021 and 0.54% at September 30, 2020.
• The Company has reached an agreement with the Lincoln Agency, a full-service insurance agency providing personal and business insurance to communities located in and surrounding Ruston, Louisiana, to acquire the remaining 62% ownership, bringing the Company's total ownership to 100%.

Results of Operations for the Three Months Ended September 30, 2021

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended September 30, 2021, was $52.5 million, a decrease of $1.8 million, or 3.2%, compared to the linked quarter. The decrease was primarily due to a $2.3 million decrease in interest income earned on the total loan portfolio offset by a $326,000 increase in interest income earned on total investment securities. The decrease in interest income earned on the total loan portfolio was primarily driven by a $366.4 million decrease in the average balance of total loans caused primarily by decreases of $242.0 million and $158.5 million in average PPP loan balances and average mortgage warehouse lines of credit loan balances, respectively, as the outstanding PPP loan balances declined through the SBA's forgiveness process and mortgage warehouse lines of credit continued to normalize. Net interest income, excluding interest earned on PPP loans and mortgage warehouse lines of credit, increased $1.6 million for the quarter ended September 30, 2021, compared to the linked quarter. The increase in interest income earned on total securities was primarily due to a $103.4 million increase in the average balance of total securities.

The yield earned on interest-earning assets for the quarter ended September 30, 2021, was 3.33%, a decrease of 11 basis points compared to the linked quarter and a 31 basis point decrease compared to the quarter ended September 30, 2020. Excluding PPP loans, the yield earned on interest-earning assets was 3.25%, a 12 basis point decrease compared to the linked quarter. The rate paid on total interest-bearing liabilities for the quarter ended September 30, 2021, was 0.53%, representing no change from the linked quarter and a decrease of 22 basis points compared to the quarter ended September 30, 2020.

The fully tax-equivalent net interest margin ("NIM") was 3.02% for the current quarter, a 10 basis point decrease and a 16 basis point decrease from the linked quarter and the quarter ended September 30, 2020, respectively. Excluding PPP loans, the fully tax-equivalent NIM was 2.94%, a 12 basis point decrease and a 34 basis point decrease from the linked quarter and the quarter ended September 30, 2020, respectively. The decline in NIM was primarily due to pricing pressure in a continued low interest rate environment and increases in liquidity resulting from a shift in balance sheet composition as PPP loan balances continued to decline and mortgage warehouse loan volume continued to normalize. This excess liquidity was the primary cause of the increase in average balances of lower-yielding interest-bearing deposits due from banks and investment securities.

Credit Quality

The table below includes key credit quality information:

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(1)   Please see the Loan Data schedule at the back of this document for additional information.

The Company recorded a credit loss provision net benefit of $3.9 million during the quarter ended September 30, 2021, compared to a credit loss provision net benefit of $5.6 million recorded during the linked quarter. The release of provision reflects the continued improvement in forecasted economic conditions at September 30, 2021, and improvements in most credit loss metrics. While economic forecasts have improved, uncertainty remains for the remainder of 2021 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.

Overall, most credit metrics improved in the current quarter compared to the linked quarter. The allowance for loan credit losses to nonperforming LHFI increased to 284.86% at September 30, 2021, compared to 252.78% at June 30, 2021. The Company's quarterly net charge-offs were stable, and nonperforming LHFI declined $5.9 million, when compared to the linked quarter. Classified loans declined $8.7 million at September 30, 2021, compared to June 30, 2021, and represented 1.52% of LHFI, excluding PPP loans.

Noninterest Income

Noninterest income for the quarter ended September 30, 2021, was $15.9 million, an increase of $3.5 million, or 28.0%, from the linked quarter. The increase from the linked quarter was primarily driven by increases of $2.3 million and $703,000 in limited partnership investment income and swap fee income, respectively.

The $2.3 million increase in limited partnership investment income was primarily due to valuation increases of the investments in two of the limited partnership funds. The $703,000 increase in swap fee income was driven by swap commission fees earned on a new swap contract executed during the current quarter.

Noninterest Expense

Noninterest expense for the quarter ended September 30, 2021, was $39.2 million, an increase of $1.3 million, compared to the linked quarter. This increase was primarily driven by an increase of $1.3 million in salaries and employee benefit expenses primarily due to a $1.0 million increase in medical self-insurance costs driven by higher medical claims during the quarter ended September 30, 2021, and the addition of 12 full-time equivalent employees.

Financial Condition

Loans

• Total LHFI decreased $209.0 million compared to the linked quarter and decreased $425.4 million compared to September 30, 2020.
• Total LHFI at September 30, 2021, were $4.26 billion, excluding PPP and mortgage warehouse lines of credit, reflecting a $95.9 million, or 2.3% increase, compared to the linked quarter and an increase of $214.2 million, or 5.3%, compared to September 30, 2020.
• PPP loans, net of deferred fees and costs, totaled $217.0 million at September 30, 2021, a decrease of $153.0 million compared to the linked quarter and a decrease of $335.4 million compared to September 30, 2020. Net deferred loan fees and costs on PPP loans were $6.3 million at September 30, 2021, $9.3 million at June 30, 2021, and $12.1 million at September 30, 2020.
• Mortgage warehouse lines of credit decreased $151.9 million compared to the linked quarter and decreased $304.2 million compared to September 30, 2020.
• Average LHFI decreased $370.3 million, compared to the linked quarter, and decreased $155.4 million compared to the quarter ended September 30, 2020.
• Average LHFI, excluding PPP and mortgage warehouse lines of credit, increased $30.2 million, compared to the linked quarter, and increased $178.5 million compared to the quarter ended September 30, 2020.

Total LHFI at September 30, 2021, were $5.19 billion, reflecting a decrease of 3.9% compared to the linked quarter and a decrease of 7.6%, compared to September 30, 2020. The decrease in LHFI compared to the linked quarter, was primarily driven by decreases in PPP loans and mortgage warehouse lines of credit, respectively, as the outstanding PPP loan balances declined primarily through the SBA's forgiveness process and mortgage warehouse lines of credit continued to normalize.

Securities

• Total securities increased $512.4 million compared to the linked quarter and increased $687.9 million, compared to September 30, 2020.
• Average securities increased $103.4 million, compared to the linked quarter, and increased $341.2 million compared to the quarter ended September 30, 2020.

Total securities at September 30, 2021, were $1.54 billion, reflecting an increase of 50.1% compared to the linked quarter and an increase of 81.2%, compared to September 30, 2020. The overall increase in securities reflects a shift in balance sheet composition as liquidity surged due to declines in PPP and mortgage warehouse lines of credit loan balances due to the SBA's forgiveness process and the normalization of mortgage warehouse lines of credit.

Deposits

• Total deposits increased $130.4 million and $222.8 million compared to the linked quarter and September 30, 2020, respectively.
• Noninterest-bearing deposits grew $119.1 million, or 6.4%, compared to June 30, 2021, and $380.7 million, or 23.8%, at September 30, 2020.

The increase in total deposits from the linked quarter is driven by increases of $141.4 million and $119.1 million in interest-bearing demand and noninterest-bearing deposits, respectively. The increase was partially offset by a decrease of $102.5 million in money market deposits. The increase from September 30, 2020 is driven by increases of $469.2 million, $380.7 million and $285.3 million in interest-bearing demand, noninterest-bearing deposits and money market deposits, respectively. These increases were partially offset by a decrease of $835.9 million in brokered deposits.

Business depositors drove an increase of $197.6 million in noninterest-bearing demand and interest-bearing deposits compared to the linked quarter, which was offset by a $149.9 million decrease in money market deposits from business depositors. Increases of $708.1 million and $162.0 million in deposits from business depositors and public funds, respectively, drove the increase in total deposits compared to September 30, 2020.

For the quarter ended September 30, 2021, average noninterest-bearing deposits as a percentage of total average deposits were 31.7%, compared to 29.4% for the linked quarter, and 30.4% for the quarter ended September 30, 2020.

Borrowings

• Average FHLB advances and other borrowings for the quarter ended September 30, 2021, increased slightly by $1.2 million or 0.4%, and decreased by $279.2 million or 51.4%, compared to the linked quarter and the quarter ended September 30, 2020, respectively.
  

The increase in average FHLB advances and other borrowings from linked quarter is driven by a $1.2 million increase in repurchase agreements. The decrease in average FHLB advances and other borrowings from the quarter ended September 30, 2020 is mainly due to a $209.3 million decrease in the balance of Federal Reserve PPP Liquidity Facility funds, as the Company repaid all advances under this facility prior to the end of the September 30, 2020 quarter.

Stockholder's Equity

Stockholders' equity was $705.7 million at September 30, 2021, an increase of $17.4 million compared to $688.2 million at June 30, 2021, and an increase of $78.0 million compared to $627.6 million at September 30, 2020. The increase from the linked quarter was primarily due to net income for the quarter of $27.0 million, which was partially offset by other comprehensive loss, net of tax and the quarterly dividend declared during the quarter ended September 30, 2021. The increase from the September 30, 2020, quarter was primarily driven by net income retained during the intervening period.

Conference Call

Origin will hold a conference call to discuss its third quarter 2021 results on Thursday, October 28, 2021, 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=8RDDBYaT .

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 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 "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" or 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 the 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 future of the London Interbank Offered Rate and the impact of any replacement alternatives 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 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 and 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

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(1) PTPP earnings, PTPP return on average stockholders' equity, PTPP return on average assets and tangible book value per common share are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their comparable GAAP measures, please see the last two pages.
(2) Net interest margin, excluding PPP loans, fully tax-equivalent is calculated by removing average PPP loans from average interest earning assets, and removing the associated interest income (net of 35 basis points assumed cost of funds on average PPP loan balances) from net-interest income.
(3) Calculated by dividing noninterest expense by the sum of net interest income plus noninterest income.
(4) September 30, 2021, ratios are estimated and calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve Board.

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(1) PTPP earnings, PTPP return on average stockholders' equity, and PTPP return on average assets are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their comparable GAAP measures, please see the last two pages.
(2) Due to the combined impact of the repurchase of common stock on the quarterly average common shares outstanding calculation compared to the impact of the repurchase of common stock shares on the year-to-date average common outstanding calculation, and the effect of rounding, the sum of the quarterly earnings per common share may not equal the year-to-date earnings per common share amount.
(3) Net interest margin, excluding PPP loans, fully tax-equivalent is calculated by removing average PPP loans from average interest-earning assets, and removing the associated interest income (net of 35 basis points assumed cost of funds on average PPP loan balances) from net interest income.
(4) Calculated by dividing noninterest expense by the sum of net interest income plus noninterest income.

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(1) Past due LHFI are defined as loans 30 days or more past due. There were $266,000 of past due PPP loans at September 30, 2021, that are fully guaranteed by the SBA.
(2) The allowance for loan credit losses ("ACL") to total LHFI excluding PPP and warehouse loans is calculated by excluding the ACL for warehouse loans from the numerator and excluding the PPP and warehouse loans from the denominator. Due to their low-risk profile, mortgage warehouse loans require a disproportionately low allocation of the allowance for loan credit losses.

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(1) Includes Government National Mortgage Association ("GNMA") repurchase average balances of $51.3 million, $60.3 million, and $31.7 million for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively. The GNMA repurchase asset and liability are recorded as equal offsetting amounts in the consolidated balance sheets, with the asset included in Loans held for sale and the liability included in FHLB advances and other borrowings.
(2) In order to present pre-tax income and resulting yields on tax-exempt investments comparable to those on taxable investments, a tax-equivalent adjustment has been computed. This adjustment also includes income tax credits received on Qualified School Construction Bonds.
(3) Net interest margin, excluding PPP loans, fully tax-equivalent is calculated by removing average PPP loans from average interest-earning assets, and removing the associated interest income (net of 35 basis points assumed cost of funds on average PPP loan balances) from net interest income.