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Origin Bancorp, Inc. Reports Earnings for Fourth Quarter and 2018 Full Year


RUSTON, Louisiana, January 23, 2019 - Origin Bancorp, Inc. (Nasdaq: OBNK) ("Origin" or the "Company"), the holding company for Origin Bank (the "Bank"), today announced net income of $13.2 million for the quarter ended December 31, 2018. This represents an increase of $860,000 from the quarter ended September 30, 2018, and an increase of $7.4 million from the quarter ended December 31, 2017. Diluted earnings per share for the quarter ended December 31, 2018, was $0.55, up $0.03 from the linked quarter and an increase of $0.32 from the quarter ended December 31, 2017.

Net income for the year ended December 31, 2018, was $51.6 million, representing an increase of $36.9 million, compared to the year ended December 31, 2017. Diluted earnings per share for the year ended December 31, 2018, was $2.20, representing an increase of $1.70 from diluted earnings per share of $0.50 for the year ended December 31, 2017.

"We are pleased to report a strong finish for 2018 with solid fourth quarter results,” said Drake Mills, Chairman, President and CEO of Origin Bancorp, Inc. “We remain committed to developing our relationships with our stakeholders as we continue to grow market share and strengthen our brand value. We are also committed to leveraging efficiencies to support continued growth and maximize shareholder value. Our organization is well positioned to take advantage of market opportunities and we believe our recent efforts position us for success in 2019."

Fourth Quarter 2018 Highlights

  • Net interest income of $42.1 million reached a historical quarterly high, increasing by $2.6 million, or 6.5%, over the linked quarter and by $7.8 million, or 22.9%, over the quarter ended December 31, 2017.
  • Net interest margin for the quarter ended December 31, 2018, was at 3.76% (3.82% fully tax equivalent), an increase of six basis points from the linked quarter and an increase of 23 basis points over the quarter ended December 31, 2017.
  • Total loans held for investment were $3.79 billion, an increase of $188.0 million, or 5.2%, from September 30, 2018, and an increase of $548.1 million, or 16.9%, from December 31, 2017. The yield earned on total loans held for investment during the quarter ended December 31, 2018, was 5.17%, compared to 5.00% for the linked quarter and 4.53% for the quarter ended December 31, 2017.
  • Total deposits increased by $56.0 million, or 1.5%, from September 30, 2018, and increased by $271.1 million, or 7.7%, from December 31, 2017. The average rate paid on our interest-bearing deposits was 1.31% compared to 1.16% for the linked quarter and 0.83% for the quarter ended December 31, 2017.
  • The Company's efficiency ratio improved to 66.52% for the quarter ended December 31, 2018, compared to 69.06%for the quarter ended September 30, 2018, and 74.00% for the quarter ended December 31, 2017.

Full Year 2018 Highlights

  • Net income and diluted earnings per share for the year ended December 31, 2018, increased by $36.9 million and$1.70, respectively, compared to the year ended December 31, 2017. Net interest margin of 3.69% (3.75% fully tax equivalent) achieved a near record high for the year ended December 31, 2018, reflecting an increase of 27 basis points from the year ended December 31, 2017.
  • Net revenue (consisting of net interest income plus noninterest income) for the year ended December 31, 2018, was$194.7 million, an increase of $35.2 million, or 22.1%, from $159.5 million for the year ended December 31, 2017.
  • Total loans held for investment increased by $548.1 million, or 16.9%, to $3.79 billion from $3.24 billion at December 31, 2017. The yield earned on total loans held for investment for the year ended December 31, 2018, was 4.96%, compared to 4.38% for the year ended December 31, 2017.
  • In connection with the successful completion of the Initial Public Offering of the Company's common stock, the Company received net proceeds, before expenses, of approximately $96.3 million and issued 3,045,426 shares. A portion of the net proceeds was used to redeem all 48,260 shares of the Company's Senior Non-Cumulative Perpetual Preferred Stock, Series SBLF, at an aggregate redemption price of $49.1 million.
  • To complement its organic growth model, a lift-out strategy was executed in the Company's Houston market and lending teams within its Dallas and Shreveport markets were augmented with seasoned lending professionals.
  • Completed acquisition of Reeves, Coon & Funderburg ("RCF") insurance agency, solidifying the Company's presence as one of the larger independent insurance agencies in North Louisiana.
  • For the sixth consecutive year Origin Bank was named one of the best banks to work for in the U.S. by American Banker and Best Companies Group, which identifies U.S. banks for outstanding employee satisfaction.

Results of Operations for the Three Months Ended December 31, 2018

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended December 31, 2018, was $42.1 million, a $2.6 million increase over the linked quarter, primarily due to a $3.9 million increase in interest income earned on loans, reflecting increases in both average balances and rates, which was partially offset by an increase in cost of borrowings. Average loan balances increased during the quarter ended December 31, 2018, compared to the third quarter of 2018, in all categories except mortgage warehouse loans, primarily as a result of the Company's relationship-driven organic growth and recent investment within its growth markets. Interest income on commercial and industrial and commercial real estate loans accounted for $3.5 million, or 89.7%, of the increase in interest income earned on loans during the linked quarter.

The rate paid on total interest-bearing liabilities for the quarter ended December 31, 2018, was 1.39%, representing an increase of 13 basis points and 49 basis points compared to the linked quarter and the quarter ended December 31, 2017, respectively. Additionally, average balances of total interest-bearing liabilities increased by $175.1 million and $393.7 million compared to the linked quarter and the quarter ended December 31, 2017, respectively. The primary drivers of the increase in the average balance of interest-bearing liabilities were borrowings and interest-bearing deposits which increased by $154.2 million and $18.1 million, respectively, compared to the linked quarter and $282.8 million and $104.7 million, respectively, compared to the quarter ended December 31, 2017. The average rate paid on interest-bearing deposits was 1.31% for the quarter ended December 31, 2018, representing an increase of 15 basis points compared to the linked quarter and an increase of 48 basis points compared to the quarter ended December 31, 2017. The increase in average balances in borrowings in the current period compared to the linked quarter and the quarter ended 2017 was largely due to a $250.0 million FHLB advance obtained in the third quarter of 2018.

Noninterest Income

Noninterest income for the quarter ended December 31, 2018, was $10.6 million, an increase of $351,000, or 3.4%, from the linked quarter. The increase in noninterest income over the linked quarter was primarily driven by an increase of $990,000 in other income as well as an increase in other fee income and a decrease in (loss) gain on sale and disposals of other assets, net of $228,000 and $184,000, respectively. The increase in other income was driven by an increase of $1.3 million in our limited partnership investment income, and was partially offset by a decrease of $219,000 in swap fee income. The increase in noninterest income was partially offset by decreases in insurance commission and fee income and mortgage banking revenue of $825,000 and $333,000, respectively. The decrease in insurance commission and fee income was largely due to a decrease in agency billed commissions caused by the timing and seasonality of policy renewals.

Noninterest income for the quarter ended December 31, 2018, increased by $1.9 million, or 21.5%, compared to the quarter ended December 31, 2017. The overall increase was driven by increases in insurance commission and fee income and other income of $1.1 million and $831,000, respectively. The increase in insurance commission and fee income was primarily driven by the RCF acquisition in July 2018, which significantly expanded the Company's insurance presence in the North Louisiana market. The increase in other income was driven largely by an increase in the Company's limited partnership income of $444,000. Partially offsetting the increase in total noninterest income from the quarter ended December 31, 2017, was a decrease in mortgage banking revenue of $818,000 primarily due to a decline in the volume of mortgage loans sold.

Noninterest Expense

Noninterest expense for the quarter ended December 31, 2018, was $35.0 million, an increase of $679,000, or 2.0%, compared to the linked quarter. The increase was largely driven by increases in data processing expenses of $316,000, salaries and employee benefit expenses of $279,000 and regulatory assessments of $255,000. The increase in data processing expenses was largely driven by the implementation of a new loan origination platform during the fourth quarter of 2018. Regulatory assessments increased in the current quarter due partially to the increase in assessable assets during the period. The increase in total noninterest expense was partially offset by a $339,000 decrease in occupancy and equipment expenses.

Noninterest expense for the quarter ended December 31, 2018, increased by $3.3 million, or 10.2%, from the quarter ended December 31, 2017, driven primarily by increases of $2.9 million in salaries and employee benefits and $414,000 in data processing expenses. The increase in salaries and employee benefit expenses was largely driven by the addition of the Houston lift-out team, Dallas and Shreveport lending professionals and the RCF acquisition in July 2018. The increase in data processing expenses in the current quarter compared to the quarter ended December 31, 2017, was largely due to the implementation of a new loan origination platform in 2018. The total increase in noninterest expense was partially offset by a $649,000 decrease in loan related expenses, largely due to significant expenses incurred during 2017 as part of the Company's strategic reduction of its energy loan portfolio, which expenses were not incurred again in 2018.

Financial Condition

Loans

Loans held for investment at December 31, 2018, were $3.79 billion, an increase of $188.0 million, or 5.2%, compared to $3.60 billion at September 30, 2018, and an increase of $548.1 million, or 16.9%, compared to $3.24 billion at December 31, 2017.

For the quarter ended December 31, 2018, average loans held for investment were $3.65 billion, an increase of $190.9 million, or 5.5%, from $3.46 billion for the quarter ended September 30, 2018. This increase was driven by the execution of our recent lift-out strategy as well as continued efforts to pursue quality lending opportunities and included increases of $131.5 million and $97.9 million in average commercial and industrial loans and real estate loans, respectively. Average mortgage warehouse loans decreased $40.2 million, or 17.6%, to $187.8 million at December 31, 2018, from September 30, 2018, primarily due to the seasonality of these loans.

Compared to the quarter ended December 31, 2017, average loans held for investment increased by $449.2 million, or 14.0%. This increase included average growth of $249.6 million and $232.7 million within real estate and commercial and industrial loans, respectively. The overall growth was partially offset by an average balance decrease of $33.9 million in mortgage warehouse loans.

Deposits

Total deposits at December 31, 2018, were $3.78 billion, an increase of $56.0 million, or 1.5%, compared to $3.73 billion at September 30, 2018, and an increase of $271.1 million, or 7.7%, compared to $3.51 billion, at December 31, 2017.

Average deposits for the quarter ended December 31, 2018, increased by $34.8 million, or 0.9%, over the linked quarter, driven by increases of $34.9 million and $32.2 million in average consumer time and average brokered deposits, respectively. The increases were partially offset by a $51.5 million decline in average consumer interest-bearing savings and demand deposits. Overall, average interest-bearing deposits increased by $18.1 million, or 0.7%, and average noninterest-bearing deposits increased by $16.7 million, or 1.7% over the linked quarter.

Average deposits for the quarter ended December 31, 2018, increased by $222.1 million, or 6.3%, over the quarter ended December 31, 2017. Increases of $111.7 million, $73.8 million and $70.6 million in average noninterest-bearing commercial, consumer time and commercial time deposits, respectively, were offset by a $78.3 million decrease in commercial money market deposits when comparing the year over year quarterly periods.

Average noninterest-bearing deposits represented 26.9% of total average deposits for the quarter ended December 31, 2018, compared to 26.7% of total average deposits for the quarter ended September 30, 2018, and 25.2% of total average deposits for the quarter ended December 31, 2017.

Borrowings

Average borrowings for the quarter ended December 31, 2018, increased by $154.2 million, or 75.4%, over the quarter ended September 30, 2018, and $282.8 million over the quarter ended December 31, 2017. The increase in the average borrowings in the fourth quarter of 2018 compared to the linked quarter and same quarter of 2017 was largely due to a $250.0 million FHLB advance obtained in the third quarter of 2018 which has been re-deployed into higher yielding interest-earning assets, such as higher yielding loans, investment securities and interest-bearing cash accounts, and replaced higher rate FHLB advances.

Stockholders' Equity

Stockholders' equity was $549.8 million at December 31, 2018, compared to $531.9 million and $455.3 million at September 30, 2018, and December 31, 2017, respectively. Net income of $13.2 million and other comprehensive income of $3.7 million for the three months ended December 31, 2018, largely resulting from a decrease in unrealized loss on securities available for sale, was the primary driver of the increase in stockholders' equity compared to September 30, 2018.

The $94.5 million increase in stockholders' equity for the quarter ended December 31, 2018, when compared to the same quarter in 2017, was largely due to net income of $51.6 million, offset by an other comprehensive loss of $4.1 million, for the year ended December 31, 2018, and to the completion of the Company's Initial Public Offering in May 2018. In connection with the offering, the Company issued 3,045,426 shares and received net proceeds, before expenses, totaling $96.3 million, a portion of which was used to redeem all outstanding shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series SBLF at an aggregate redemption price of $49.1 million. Also, during the quarter ended June 30, 2018, all of the 901,644 shares of the Company's outstanding Series D preferred stock were converted into shares of its common stock, on a one-for-one basis. As a result, no shares of Series D preferred stock were outstanding at December 31, 2018.

Credit Quality

The Company recorded provision expense of $1.7 million for the quarter ended December 31, 2018, compared to provision expense of $504,000 and $242,000 for the linked quarter and the quarter ended December 31, 2017, respectively. The increase in provision expense from the linked quarter and the quarter ended December 31, 2017, was primarily due to recent loan growth.

At December 31, 2018, nonperforming loans were $32.6 million, representing an increase of $4.7 million, or 16.6%, from the linked quarter. Nonperforming loans increased by $8.8 million, or 37.0%, from $23.8 million at December 31, 2017, primarily due to downgrades associated with three commercial lending relationships.

Allowance for loan losses as a percentage of total loans held for investment was 0.90% at December 31, 2018, compared to 0.99% and 1.14% at September 30, 2018, and December 31, 2017, respectively. Allowance for loan losses as a percentage of nonperforming loans held for investment was 107.37% at December 31, 2018, compared to 134.54% and 155.80% at September 30, 2018, and December 31, 2017, respectively.

Non-GAAP Financial Measures

Origin reports its results in accordance with United States generally accepted accounting principles ("GAAP"). However, management believes that certain supplemental non-GAAP financial measures used in managing its business may provide meaningful information to investors about underlying trends in its business and management uses these non-GAAP measures to evaluate the Company’s operating performance and believes that these non-GAAP measures provide information that is important to investors and that is useful in understanding Origin's results of operations. However, non-GAAP financial measures are supplemental and should be viewed in addition to, and not as an alternative for, Origin's reported results prepared in accordance with GAAP. Specifically, the Company reviews and reports tangible book value per common share. For a reconciliation of this non-GAAP measure to its most commonly used GAAP measure, see page 13 of this press release.

Conference Call

Origin will hold a conference call to discuss its fourth quarter and full year 2018 results on Thursday, January 24, 2019, at 8:00 a.m. Central (9:00 a.m. Eastern). To participate in the live conference call, please dial (877) 270-2148; International: (412) 902-6510 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/links/obnk190124.html.

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 for Origin Bank, headquartered in Ruston, Louisiana, which provides a broad range of financial services to small and medium-sized businesses, municipalities, high net-worth individuals and retail clients from 41 banking centers located from Dallas/Fort Worth, Texas across North Louisiana to Central Mississippi, as well as in Houston, Texas. 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, and related transactions, integration of acquired businesses, ability to recognize anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are all subject to change and may be inherently unreliable due to the multiple factors that impact economic 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 preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" 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: deterioration of Origin’s asset quality; changes in 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, including any loans acquired in acquisition transactions; changes in the value of collateral securing Origin’s loans; business and economic conditions generally and in the financial services industry, nationally and within Origin’s local market area; Origin’s ability to prudently manage its growth and execute its strategy; changes in management personnel; Origin’s ability to maintain important deposit customer relationships; volatility and direction of market interest rates, which may increase funding costs or reduce interest-earning asset yields thus reducing margin; 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, including the effects of declines in housing markets; 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; the extensive federal and state regulation, supervision and examination governing almost every aspect of Origin’s operations including changes in regulations affecting financial institutions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations being issued in accordance with this statute and potential expenses associated with complying with such regulations; 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; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations; and the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability and manmade disasters including terrorist attack. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to "Cautionary Note Regarding Forward-Looking Statements" in Origin’s most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission ("SEC") on November 7, 2018, and "Risk Factors", in Origin’s prospectus filed with the SEC on May 9, 2018, pursuant to Section 424(b) of the Securities Act of 1933, as amended, and any updates to those risk factors set forth in Origin’s subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or 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. 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, projected and estimated numbers are used for illustrative purpose 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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