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EX-32.2 - EXHIBIT 32.2 - Origin Bancorp, Inc.a3312018obncexhibit322.htm
EX-32.1 - EXHIBIT 32.1 - Origin Bancorp, Inc.a3312018obnkexhibit321.htm
EX-31.2 - EXHIBIT 31.2 - Origin Bancorp, Inc.a3312018obnkexhibit312.htm
EX-31.1 - EXHIBIT 31.1 - Origin Bancorp, Inc.a3312018obnkexhibit311.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMMISSION
Washington, D.C. 20549
FORM 10-Q


(Mark One)

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________

Commission file number 001-38487
Origin Bancorp, Inc.

(Exact name of registrant as specified in its charter)
Louisiana
6022
72-1192928
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer
Identification Number)

500 South Service Road East
Ruston, Louisiana 71270
(318) 255-2222
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐
 
Accelerated filer ☐
Non-accelerated filer ☒
 
Smaller reporting company ☐
(Do not check if a smaller reporting company)
 
Emerging growth company ☒
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class: Common Stock
 
Shares Outstanding as of May 29, 2018
 
 
22,570,508


1



ORIGIN BANCORP, INC.
FORM 10-Q
MARCH 31, 2018
INDEX
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


ORIGIN BANCORP, INC.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)




 
March 31, 2018
 
December 31, 2017
Assets
(Unaudited)
 
 
Cash and due from banks
$
52,989

 
$
78,489

Interest-bearing deposits in banks
194,268

 
108,698

Total cash and cash equivalents
247,257

 
187,187

Securities:
 
 
 
Available for sale
414,157

 
404,532

Held to maturity (fair value: March 31, 2018 - $19,858, December 31, 2017 - $20,265)
19,860

 
20,188

Securities carried at fair value through income
11,723

 
12,033

Total securities
445,740

 
436,753

Non-marketable equity securities held in other financial institutions
22,995

 
22,967

Loans held for sale ($19,301 and $32,768 at fair value, respectively)
48,988

 
65,343

Loans, net of allowance for loan losses of $34,132 and $37,083, respectively
($25,934 and $26,611 at fair value, respectively)
3,211,860

 
3,203,948

Premises and equipment, net
76,648

 
77,408

Mortgage servicing rights
25,999

 
24,182

Cash surrender value of bank-owned life insurance
28,185

 
27,993

Goodwill and other intangible assets, net
24,219

 
24,336

Accrued interest receivable and other assets
83,008

 
83,878

Total assets
$
4,214,899

 
$
4,153,995

Liabilities and Stockholders' Equity
 
 
 
Noninterest-bearing deposits
$
885,883

 
$
832,853

Interest-bearing deposits
2,071,626

 
2,060,068

Time deposits
623,229

 
619,093

Total deposits
3,580,738

 
3,512,014

FHLB advances and other borrowings
132,224

 
144,357

Junior subordinated debentures
9,625

 
9,619

Accrued expenses and other liabilities
29,488

 
32,663

Total liabilities
3,752,075

 
3,698,653

Commitments and contingencies
34,991

 
34,991

Stockholders' equity:
 
 
 
Preferred stock, no par value, 2,000,000 shares authorized:
 
 
 
Preferred stock - Series SBLF (48,260 shares authorized and issued)
48,260

 
48,260

Preferred stock - Series D (950,000 shares authorized; 901,644 shares issued)
16,998

 
16,998

Common stock ($5 par value; authorized 50,000,000 shares; issued 19,525,241 and 19,518,752 shares, respectively)
97,626

 
97,594

Additional paid‑in capital
146,201

 
146,061

Retained earnings
156,498

 
145,122

Accumulated other comprehensive income (loss)
(2,759
)
 
1,307

 
462,824

 
455,342

Less: ESOP-owned shares
34,991

 
34,991

Total stockholders' equity
427,833

 
420,351

Total liabilities and stockholders' equity
$
4,214,899

 
$
4,153,995


The accompanying notes are an integral part of these condensed consolidated financial statements.
3

ORIGIN BANCORP, INC.
Consolidated Statements of Income
(unaudited)
(Dollars in thousands, except per share data)


 
Three months ended March 31,
 
2018
 
2017
Interest and dividend income
 
 
 
Interest and fees on loans
$
37,474

 
$
31,968

Investment securities-taxable
1,740

 
1,448

Investment securities-nontaxable
1,184

 
1,200

Interest and dividend income on assets held in other financial institutions
1,046

 
662

Total interest and dividend income
41,444

 
35,278

Interest expense
 
 
 
Interest-bearing deposits
5,980

 
4,236

FHLB advances and other borrowings
604

 
605

Subordinated debentures
136

 
135

Total interest expense
6,720

 
4,976

Net interest income
34,724

 
30,302

(Benefit) provision for credit losses
(1,524
)
 
2,814

Net interest income after (benefit) provision for credit losses
36,248

 
27,488

Noninterest income
 
 
 
Service charges and fees
3,014

 
2,772

Mortgage banking revenue
2,394

 
4,092

Insurance commission and fee income
2,107

 
1,924

Loss on sales and disposals of other assets, net
(61
)
 
(129
)
Other fee income
452

 
679

Other income
1,894

 
787

Total noninterest income
9,800

 
10,125

Noninterest expense
 
 
 
Salaries and employee benefits
18,241

 
16,587

Occupancy and equipment, net
3,653

 
3,944

Data processing
1,473

 
1,273

Electronic banking
743

 
639

Communications
515

 
433

Advertising and marketing
657

 
589

Professional services
665

 
609

Regulatory assessments
720

 
681

Loan related expenses
713

 
785

Office and operations
1,278

 
1,276

Other expenses
1,199

 
970

Total noninterest expense
29,857

 
27,786

Income before income tax expense
16,191

 
9,827

Income tax expense
2,784

 
2,580

Net income
$
13,407

 
$
7,247

Preferred stock dividends
1,115

 
1,115

Net income allocated to participating stockholders
553

 
267

Net income available to common stockholders
$
11,739

 
$
5,865

Basic earnings per common share
$
0.60

 
$
0.30

Diluted earnings per common share
$
0.60

 
$
0.30


The accompanying notes are an integral part of these condensed consolidated financial statements.
4

ORIGIN BANCORP, INC.
Consolidated Statements of Comprehensive Income
(unaudited)
(Dollars in thousands)


 
 
Three months ended March 31,
 
 
2018
 
2017
Net income
 
$
13,407

 
$
7,247

Other comprehensive income (loss)
 
 
 
 
Securities available for sale and transferred securities:
 


 
 
Net unrealized holding gains (losses) arising during the period
 
(5,683
)
 
429

Net losses realized as a yield adjustment in interest on investment securities
 
(3
)
 
(2
)
Change in the net unrealized gain (loss) on investment securities, before tax
 
(5,686
)
 
427

Income tax expense (benefit) related to net unrealized gains (losses) arising during the period
 
(1,194
)
 
149

Change in the net unrealized gain (loss) on investment securities, net of tax
 
(4,492
)
 
278

Cash flow hedges:
 
 
 
 
Net unrealized gains arising during the period
 
165

 
2

Reclassification adjustment for losses included in net income
 
17

 
31

Change in the net unrealized gain on cash flow hedges, before tax
 
182

 
33

Income tax expense related to net unrealized gains on cash flow hedges
 
38

 
12

Change in the net unrealized gain on cash flow hedges, net of tax
 
144

 
21

Other comprehensive income (loss), net of tax
 
(4,348
)
 
299

Comprehensive income
 
$
9,059

 
$
7,546



The accompanying notes are an integral part of these condensed consolidated financial statements.
5

ORIGIN BANCORP, INC.
Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
(Dollars in thousands, except per share data)


 
 
Common Shares Outstanding
 
Preferred
Stock
Series
SBLF
 
Preferred
Stock
Series D
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Less: ESOP-Owned Shares
 
Total
Stockholders'
Equity
For the three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
 
19,483,718

 
$
48,260

 
$
16,998

 
$
97,419

 
$
145,068

 
$
137,449

 
$
3,463

 
$
(28,564
)
 
$
420,093

Net income
 

 

 

 

 

 
7,247

 

 

 
7,247

Other comprehensive income, net of tax
 

 

 

 

 

 

 
299

 

 
299

Recognition of stock compensation, net
 
(5,200
)
 

 

 
(26
)
 
181

 

 

 

 
155

Net change in fair value of ESOP shares
 

 

 

 

 

 

 

 
28

 
28

Dividends declared - Series SBLF preferred stock
 

 

 

 

 

 
(1,086
)
 

 

 
(1,086
)
Dividends declared - Series D preferred stock
 

 

 

 

 

 
(29
)
 

 

 
(29
)
Dividends declared - common stock ($0.0325 per share)
 

 

 

 

 

 
(633
)
 

 

 
(633
)
Balance at March 31, 2017
 
19,478,518

 
$
48,260

 
$
16,998

 
$
97,393

 
$
145,249

 
$
142,948

 
$
3,762

 
$
(28,536
)
 
$
426,074

For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
 
19,518,752

 
$
48,260

 
$
16,998

 
$
97,594

 
$
146,061

 
$
145,122

 
$
1,307

 
$
(34,991
)
 
$
420,351

Net income
 

 

 

 

 

 
13,407

 

 

 
13,407

Other comprehensive loss, net of tax
 

 

 

 

 

 

 
(4,348
)
 

 
(4,348
)
Reclassification of tax effects related to the adoption of ASU 2018-02
 

 

 

 

 

 
(282
)
 
282

 

 

Recognition of stock compensation, net
 
6,489

 

 

 
32

 
140

 

 

 
 
 
172

Dividends declared - Series SBLF preferred stock
 

 

 

 

 

 
(1,086
)
 

 

 
(1,086
)
Dividends declared - Series D preferred stock
 

 

 

 

 

 
(29
)
 

 

 
(29
)
Dividends declared - common stock ($0.0325 per share)
 

 

 

 

 

 
(634
)
 

 

 
(634
)
Balance at March 31, 2018
 
19,525,241

 
$
48,260

 
$
16,998

 
$
97,626

 
$
146,201

 
$
156,498

 
$
(2,759
)
 
$
(34,991
)
 
$
427,833



The accompanying notes are an integral part of these condensed consolidated financial statements.
6

ORIGIN BANCORP, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Dollars in thousands)


 
Three months ended March 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
13,407

 
$
7,247

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
(Benefit) provision for credit losses
(1,524
)
 
2,814

Depreciation and amortization
1,342

 
1,515

Net amortization on securities
353

 
360

Amortization of investments in tax credit funds
488

 
516

Deferred income tax expense
533

 
37

Stock-based compensation expense
194

 
217

Originations of mortgage loans held for sale
(74,938
)
 
(102,723
)
Proceeds from mortgage loans held for sale
84,528

 
114,563

Originations of mortgage servicing rights
(543
)
 
(628
)
Net loss on disposals of premises and equipment
26

 
17

Increase in the cash surrender value of life insurance
(192
)
 
(168
)
Write downs and net losses on sales of other real estate owned
35

 
112

Net increase in accrued interest and other assets
2,179

 
3,969

Net increase (decrease) in accrued expenses and other liabilities
(6,098
)
 
9,545

Other operating activities, net
6,611

 
1,309

Net cash provided by operating activities
26,401

 
38,702

Cash flows from investing activities:
 
 
 
Purchases of securities available for sale
(118,334
)
 
(126,064
)
Maturities, paydowns and calls of securities available for sale
102,671

 
103,509

Maturities, paydowns and calls of securities held to maturity
327

 
149

Originations of mortgage warehouse loans
(943,243
)
 
(784,671
)
Proceeds from pay-offs of mortgage warehouse loans
1,007,133

 
757,482

Net (increase)/decrease in loans, excluding mortgage warehouse and loans held for sale
(70,945
)
 
34,017

Return of capital on limited partnership investments
144

 
520

Capital calls on limited partnership investments
(1,450
)
 
(1,000
)
Purchases of premises and equipment
(544
)
 
(1,088
)
Proceeds from sales of premises and equipment
53

 
171

Proceeds from sales of other real estate owned
148

 
628

Net cash used in investing activities
(24,040
)
 
(16,347
)
Cash flows from financing activities:
 
 
 
Net increase in deposits
68,724

 
27,510

Net decrease in other borrowed funds
(248
)
 
(237
)
Net decrease in securities sold under agreements to repurchase
(8,996
)
 
(6,110
)
Dividends paid
(1,749
)
 
(1,748
)
Taxes paid related to net share settlement of equity awards
(22
)
 
(62
)
Net cash provided by financing activities
57,709

 
19,353

Net increase in cash and cash equivalents
60,070

 
41,708

Cash and cash equivalents at beginning of period
187,187

 
259,883

Cash and cash equivalents at end of period
$
247,257

 
$
301,591

 
 
 
 
Income taxes paid
$
1


$
12

Significant non-cash transactions:
 
 
 
Real estate acquired in settlement of loans
$
405


$
119




The accompanying notes are an integral part of these condensed consolidated financial statements.
7

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements




Note 1 - Significant Accounting Policies

Nature of Operations:     Origin Bancorp, Inc. (the "Company") is a financial holding company headquartered in Ruston, Louisiana. The Company's wholly owned bank subsidiary, Origin Bank (the "Bank"), provides a broad range of financial services to businesses, municipalities, high net worth individuals and retail clients. The Company currently operates 41 banking centers located in North Louisiana, Central Mississippi, Dallas/Fort Worth and Houston, Texas.
Consolidation:     The condensed consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling financial interest, including the Bank and Davison Insurance Agency, LLC ("Davison Insurance"), and Davison Insurance’s wholly owned subsidiary, Thomas & Farr Agency, LLC (“T&F”). These condensed consolidated interim financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP") and with the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all normal and recurring adjustments which are considered necessary to fairly present the results for the interim periods presented have been included. These unaudited statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2017, included in the Company's prospectus filed with the Securities and Exchange Commission on May 9, 2018 pursuant to Section 424(b) of the Securities Act of 1933, as amended. Interim results are not necessarily indicative of results for a full year. Certain prior year amounts have been reclassified to conform to the current year financial statement presentations. These changes and reclassifications did not impact previously reported net income or comprehensive income.
The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in the 2017 financial statements included in the Company's prospectus filed with the Securities and Exchange Commission on May 9, 2018. There were no new accounting policies or changes to existing policies adopted during the first three months of 2018 that had a significant effect on the Company’s results of operations or financial condition. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.
Use of Estimates: The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition:    
On January 1, 2018, the Company adopted Accounting Standards Update "ASU" No. 2014-09, "Revenue from Contracts with Customers" (Topic 606), which outlines a single comprehensive revenue recognition model for entities to follow in accounting for revenue from contracts with customers. The implementation of this new guidance did not have a material impact on the measurement or recognition of revenue and no cumulative effect adjustment was recorded to opening retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with the Company's historic accounting under Topic 605.
The majority of the Company's revenue is generated from sources outside the scope of Topic 606. Interest and fees on loans, income from investment securities and mortgage banking revenue are all outside the scope of Topic 606 and are recorded in adherence with US GAAP. Service charges and fees on deposit accounts, credit card interchange insurance commission and fee income, as well as gains and losses on the sale of other assets including other real estate owned (“OREO”) are within the scope of Topic 606; however, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Descriptions of the Company's revenue generating activities that are within the scope of Topic 606 are described below.
Service charges and fees on deposit accounts
Service charges and fees on deposit accounts are primarily comprised of maintenance fees, service fees, stop payment and non-sufficient funds fees. The Company's performance obligation for service fees or other fees covering a period of time are generally satisfied, and related revenue recognized, over the period in which the service is provided. The Company's performance obligation for transactional-based fees are generally satisfied, and related revenue recognized, at a point in time.

8

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



Insurance commission and fee income
The Company earns commission income through production on behalf of insurance carriers and also earns fee income by providing complementary services such as collection of premiums. In most instances the Company considers the performance obligation to be complete at the time the service was rendered.
Credit card interchange income
The Company records credit card interchange income at a point in time as card transactions occur. The Company's performance obligation for these transactions is deemed to have occurred upon completion of each transaction. The amounts are included as a component of other income in the consolidated statements of income.
Gain or loss on sale of other assets and OREO
In the normal course of business, the Company recognizes the sale on other assets and OREO, along with any gain or loss, when control of the property transfers to the buyer through an executed contractual agreement. The transaction price is fixed, and on occasion the Company will finance a portion of the purchase price of the transferred asset.

Note 2 - Earnings Per Share
 
 
Three months ended March 31,
(Dollars in thousands, except per share data)
 
2018
 
2017
Basic earnings per common share
 
 
 
 
Net income
 
$
13,407

 
$
7,247

Less: Dividends to preferred stock
 
1,115

 
1,115

         Net income allocated to participating stockholders(1)
 
553

 
267

Net income available to common stockholders
 
$
11,739

 
$
5,865

Weighted average common shares outstanding(2)
 
19,459,278

 
19,404,491

Basic earnings per common share
 
$
0.60

 
$
0.30

Diluted earnings per common share
 
 
 
 
Diluted earnings applicable to common stockholders(3)
 
$
11,771

 
$
5,886

Weighted average diluted common shares outstanding:
 
 
 
 
Weighted average common shares outstanding(2)
 
19,459,278

 
19,404,491

Dilutive effect of common stock options
 
216,195

 
190,782

Weighted average diluted common shares outstanding
 
19,675,473

 
19,595,273

Diluted earnings per common share
 
$
0.60

 
$
0.30

____________________________
(1) 
Participating stockholders include those that hold certain share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents. Such shares or units are considered participating securities (i.e., nonvested restricted stock grants). Additionally, Series D preferred stockholders are participating stockholders as those shares participate in dividends with common shares on a one for one basis. Net income allocated to participating stockholders does not include dividends paid for preferred stock.
(2) 
Weighted average common shares outstanding exclude average unearned restricted shares in the computation of basic earnings per share. Under the two-class method, unearned restricted shares are included in the computation of diluted earnings per share; however, depending on nuances of the computation, they may or may not affect the number of weighted average diluted common shares outstanding. Unearned restricted shares are considered issued and therefore included as part of total issued shares disclosed on the consolidated balance sheets.
(3) 
Net income allocated to common stockholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common stock equivalents for options to dilutive shares outstanding, which alters the ratio used to allocate earnings to common stockholders and participating securities for the purposes of calculating diluted earnings per share.


9

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



Note 3 - Securities

The following table is a summary of the amortized cost and estimated fair value, including gross unrealized gains and losses, of available for sale, held to maturity and securities carried at fair value through income for the dates indicated:
(Dollars in thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized Losses
 
Fair
Value
March 31, 2018
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
State and municipal securities
 
$
124,889


$
2,621


$
(289
)
 
$
127,221

Corporate bonds
 
3,000


115



 
3,115

Residential mortgage-backed securities
 
105,456


189


(2,204
)
 
103,441

Residential collateralized mortgage obligations
 
184,648


67


(4,335
)
 
180,380

Total
 
$
417,993

 
$
2,992

 
$
(6,828
)
 
$
414,157

Held to maturity:
 
 
 
 
 
 
 
 
State and municipal securities
 
$
19,860


$


$
(2
)
 
$
19,858

Securities carried at fair value through income:
 
 
 
 
 
 
 
 
State and municipal securities(1)
 
$
11,918


$


$


$
11,723

 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
State and municipal securities
 
$
125,909

 
$
4,104

 
$
(35
)
 
$
129,978

Corporate bonds
 
3,000

 
136

 

 
3,136

Residential mortgage-backed securities
 
105,132

 
492

 
(595
)
 
105,029

Residential collateralized mortgage obligations
 
168,645

 
262

 
(2,518
)
 
166,389

Total
 
$
402,686

 
$
4,994

 
$
(3,148
)
 
$
404,532

Held to maturity:
 
 
 
 
 
 
 
 
State and municipal securities
 
$
20,188

 
$
77

 
$

 
$
20,265

Securities carried at fair value through income:
 
 
 
 
 
 
 
 
State and municipal securities(1)
 
$
11,918

 
$

 
$

 
$
12,033

____________________________
(1) 
Securities carried at fair value through income have no unrealized gains of losses at the balance sheet date as all changes in value have been recognized in the consolidated statements of income. See Note 5 - Fair Value of Financial Instruments for more information.



10

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



Securities with unrealized losses at March 31, 2018 and December 31, 2017, aggregated by investment category and those individual securities have been in a continuous unrealized loss position under and over 12 months were as follows:
(Dollars in thousands)
 
Less than 12 Months
 
12 Months or More
 
Total
March 31, 2018
 
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
 
$
29,828

 
$
(247
)
 
$
1,190

 
$
(42
)
 
$
31,018

 
$
(289
)
Residential mortgage-backed securities
 
68,433

 
(1,435
)
 
19,072

 
(769
)
 
87,505

 
(2,204
)
Residential collateralized mortgage obligations
 
113,359

 
(1,772
)
 
57,473

 
(2,563
)
 
170,832

 
(4,335
)
Total
 
$
211,620

 
$
(3,454
)
 
$
77,735

 
$
(3,374
)
 
$
289,355

 
$
(6,828
)
Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
 
$
14,635

 
$
(2
)
 
$

 
$

 
$
14,635

 
$
(2
)
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
 
$
2,114

 
$
(5
)
 
$
1,210

 
$
(30
)
 
$
3,324

 
$
(35
)
Residential mortgage-backed securities
 
46,018

 
(198
)
 
20,233

 
(397
)
 
66,251

 
(595
)
Residential collateralized mortgage obligations
 
70,788

 
(641
)
 
60,622

 
(1,877
)
 
131,410

 
(2,518
)
Total
 
$
118,920

 
$
(844
)
 
$
82,065

 
$
(2,304
)
 
$
200,985

 
$
(3,148
)
Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities
 
$

 
$

 
$

 
$

 
$

 
$


At March 31, 2018, the Company had 114 securities that were in an unrealized loss position. The unrealized losses for each of the securities relate to market interest rate changes. The Company has considered the current market for the securities in an unrealized loss position, as well as the severity and duration of the impairments, and expects that the value will recover. Management does not intend to sell these investments until the fair value exceeds amortized cost and it is more likely than not that the Company will not be required to sell debt securities before the anticipated recovery of the amortized cost basis of the security; thus, the impairment is determined not to be other-than-temporary.
The following table presents the amortized cost and fair value of securities available for sale and held to maturity at March 31, 2018, grouped by contractual maturity. Mortgage-backed securities and collateralized mortgage obligations, which do not have contractual payments due at a single maturity date, are shown separately. Actual maturities for mortgage-backed securities and collateralized mortgage obligations will differ from contractual maturities as a result of prepayments made on the underlying mortgages.
(Dollars in thousands)
 
Held to maturity
 
Available for sale
March 31, 2018
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
 
$

 
$

 
$
2,905

 
$
2,920

Due after one year through five years
 
14,637

 
14,635

 
27,718

 
28,271

Due after five years through ten years
 

 

 
84,633

 
86,216

Due after ten years
 
5,223

 
5,223

 
12,633

 
12,929

Residential mortgage-backed securities
 

 

 
105,456

 
103,441

Residential collateralized mortgage obligations
 

 

 
184,648

 
180,380

Total
 
$
19,860

 
$
19,858

 
$
417,993

 
$
414,157



11

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



The following table presents carrying amounts of securities pledged as collateral for deposits and repurchase agreements for the period ends presented.
(Dollars in thousands)
 
March 31, 2018
 
December 31, 2017
Carrying value of securities pledged to secure public deposits
 
$
256,224

 
$
276,319

Carrying value of securities pledged to repurchase agreements
 
$
35,669

 
$
36,685

Note 4 - Loans

Loans consist of the following:
(Dollars in thousands)
March 31, 2018
 
December 31, 2017
Loans held for sale
$
48,988

 
$
65,343

Loans held for investment:
 
 
 
Loans secured by real estate:
 
 
 
Commercial real estate
$
1,096,948

 
$
1,083,275

Construction/land/land development
340,684

 
322,404

Residential real estate
583,461

 
570,583

Total real estate
2,021,093

 
1,976,262

Commercial and industrial
1,012,760

 
989,220

Mortgage warehouse lines of credit
191,154

 
255,044

Consumer
20,985

 
20,505

Total loans held for investment(1)
3,245,992

 
3,241,031

Less: Allowance for loan losses
34,132

 
37,083

Net loans held for investment
$
3,211,860

 
$
3,203,948

____________________________
(1) 
Presented net of net deferred loan fees of $1.5 million and $1.0 million at March 31, 2018 and December 31, 2017, respectively.

Included in total loans held for investment are $20.4 million and $5.5 million of commercial real estate loans and commercial and industrial loans, respectively, for which the fair value option has been elected at March 31, 2018. At December 31, 2017, the Company held $21.0 million and $5.6 million of commercial real estate loans and commercial and industrial loans, respectively, at fair value. The Company mitigates the interest rate component of fair value risk on loans at fair value by entering into derivative interest rate contracts. See Note 5 - Fair Value of Financial Instruments for more information on loans for which the fair value option has been elected.
Credit quality indicators. As part of the Company's commitment to manage the credit quality of its loan portfolio, management annually updates and evaluates certain credit quality indicators, which include but are not limited to (i) weighted-average risk rating of the loan portfolio, (ii) net charge-offs, (iii) level of non-performing loans, (iv) level of classified loans, and (v) the general economic conditions in the states in which the Company operates. The Company maintains an internal risk rating system where ratings are assigned to individual loans based on assessed risk. Risk ratings are continually evaluated to ensure they are appropriate based on currently available information. These risk ratings are the primary indicator of credit quality for its loan portfolio.
    

12

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



The following is a summary description of the Company's internal risk ratings:
• Pass (1-6)
Loans within this risk rating are further categorized as follows:
 
Minimal risk (1)
Well-collateralized by cash equivalent instruments held by the Bank.
 
Moderate risk (2)
Borrowers with excellent asset quality and liquidity. Borrowers' capitalization and liquidity exceed industry norms. Borrowers in this category have significant levels of liquid assets and have a low level of leverage.
 
Better than average risk (3)
Borrowers with strong financial strength and excellent liquidity that consistently demonstrate strong operating performance. Borrowers in this category generally have a sizable net worth that can be converted into liquid assets within 12 months.
 
Average risk (4)
Borrowers with sound credit quality and financial performance, including liquidity. Borrowers are supported by sufficient cash flow coverage generated through operations across the full business cycle.
 
Marginally acceptable risk (5)
Loans generally meet minimum requirements for an acceptable loan in accordance with lending policy, but possess one or more attributes that cause the overall risk profile to be higher than the majority of newly approved loans.
 
Watch (6)
A passing loan with one or more factors that identify a potential weakness in the overall ability of the borrower to repay the loan. These weaknesses are generally mitigated by other factors that reduce the risk of delinquency or loss.
 
• Special Mention (7)
This grade is intended to be temporary and includes borrowers whose credit quality have deteriorated and is at risk of further decline.  
 
• Substandard (8)
This grade includes "Substandard" loans, in accordance with regulatory guidelines. Substandard loans exhibit a well-defined weakness that jeopardizes debt repayment in accordance with contractual agreements, even though the loan may be performing. These obligations are characterized by the distinct possibility that a loss may be incurred if these weaknesses are not corrected and repayment may be dependent upon collateral liquidation or secondary source of repayment.
 
• Doubtful (9)
This grade includes "Doubtful" loans, in accordance with regulatory guidelines. Such loans are placed on nonaccrual status and repayment may be dependent upon collateral with no readily determinable valuation or valuations that are highly subjective in nature. Repayment for these loans is considered improbable based on currently existing facts and circumstances.
 
• Loss (0)
This grade includes "Loss" loans in accordance with regulatory guidelines. Loss loans are charged-off or written-down when repayment is not expected.
 

13

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



The recorded investment in loans by credit quality indicator at March 31, 2018 and December 31, 2017, excluding loans held for sale, were as follows:
 
March 31, 2018
(Dollars in thousands)
Pass
 
Special mention
 
Substandard
 
Doubtful
 
Loss
 
Total
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
1,070,984

 
$
5,348

 
$
20,616

 
$

 
$

 
$
1,096,948

Construction/land/land development
337,148

 
165

 
3,371

 

 

 
340,684

Residential real estate
574,470

 
33

 
8,958

 

 

 
583,461

Total real estate
1,982,602

 
5,546

 
32,945

 

 

 
2,021,093

Commercial and industrial
945,417

 
9,652

 
57,691

 

 

 
1,012,760

Mortgage warehouse lines of credit
191,154

 

 

 

 

 
191,154

Consumer
20,636

 

 
349

 

 

 
20,985

Total loans held for investment
$
3,139,809

 
$
15,198

 
$
90,985

 
$

 
$

 
$
3,245,992

 
December 31, 2017
(Dollars in thousands)
Pass
 
Special mention
 
Substandard
 
Doubtful
 
Loss
 
Total
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
1,055,911

 
$
7,798

 
$
19,566

 
$

 
$

 
$
1,083,275

Construction/land/land development
318,488

 
170

 
3,746

 

 

 
322,404

Residential real estate
560,945

 
778

 
8,860

 

 

 
570,583

Total real estate
1,935,344

 
8,746

 
32,172

 

 

 
1,976,262

Commercial and industrial
915,111

 
15,332

 
58,777

 

 

 
989,220

Mortgage warehouse lines of credit
255,044

 

 

 

 

 
255,044

Consumer
20,223

 

 
279

 
3

 

 
20,505

Total loans held for investment
$
3,125,722

 
$
24,078

 
$
91,228

 
$
3

 
$

 
$
3,241,031

The following tables present the Company’s loan portfolio aging analysis at the dates indicated:
 
March 31, 2018
(Dollars in thousands)
30-59 Days past due
 
60-89 Days past due
 
Loans past due 90 days or more
 
Total past due
 
Current loans
 
Total loans receivable
 
Accruing loans 90 or more days past due
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
8,940

 
$

 
$
844

 
$
9,784

 
$
1,087,164

 
$
1,096,948

 
$

Construction/land/land development
1,534

 

 
558

 
2,092

 
338,592

 
340,684

 

Residential real estate
2,917

 
653

 
3,428

 
6,998

 
576,463

 
583,461

 

Total real estate
13,391

 
653

 
4,830

 
18,874

 
2,002,219

 
2,021,093

 

Commercial and industrial
1,877

 
355

 
7,905

 
10,137

 
1,002,623

 
1,012,760

 

Mortgage warehouse lines of credit

 

 

 

 
191,154

 
191,154

 

Consumer
136

 
64

 
68

 
268

 
20,717

 
20,985

 

Total loans held for investment
$
15,404

 
$
1,072

 
$
12,803

 
$
29,279

 
$
3,216,713

 
$
3,245,992

 
$


14

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



 
December 31, 2017
(Dollars in thousands)
30-59 Days past due
 
60-89 Days past due
 
Loans past due 90 days or more
 
Total past due
 
Current loans
 
Total loans receivable
 
Accruing loans 90 or more days past due
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
8,427

 
$
2,791

 
$
1,150

 
$
12,368

 
$
1,070,907

 
$
1,083,275

 
$

Construction/land/land development
1,488

 
172

 
464

 
2,124

 
320,280

 
322,404

 

Residential real estate
2,630

 
347

 
3,910

 
6,887

 
563,696

 
570,583

 

Total real estate
12,545

 
3,310

 
5,524

 
21,379

 
1,954,883

 
1,976,262

 

Commercial and industrial
1,517

 
9,922

 
8,074

 
19,513

 
969,707

 
989,220

 

Mortgage warehouse lines of credit

 

 

 

 
255,044

 
255,044

 

Consumer
178

 
128

 
74

 
380

 
20,125

 
20,505

 

Total loans held for investment
$
14,240

 
$
13,360

 
$
13,672

 
$
41,272

 
$
3,199,759

 
$
3,241,031

 
$

The following tables detail activity in the allowance for loan losses by portfolio segment. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
 
Three months ended March 31, 2018
(Dollars in thousands)
Beginning balance
 
Charge-offs
 
Recoveries
 
Provision (Benefit)(1)
 
Ending balance
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
8,998

 
$
9

 
$
127

 
$
1,028

 
$
10,144

Construction/land/land development
2,950

 

 
1

 
(244
)
 
2,707

Residential real estate
5,807

 
9

 
19

 
(346
)
 
5,471

Commercial and industrial
18,831

 
1,703

 
174

 
(1,965
)
 
15,337

Mortgage warehouse lines of credit
214

 

 

 
(56
)
 
158

Consumer
283

 
17

 
24

 
25

 
315

Total
$
37,083

 
$
1,738

 
$
345

 
$
(1,558
)
 
$
34,132

____________________________
(1) 
The $1.5 million benefit for credit losses on the consolidated statements of income includes a $1.6 million net loan loss benefit and a $34,000 provision for off-balance sheet commitments for the three months ended March 31, 2018.

 
Three months ended March 31, 2017
(Dollars in thousands)
Beginning balance
 
Charge-offs
 
Recoveries
 
Provision (Benefit)(1)
 
Ending balance
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
8,718

 
$

 
$
2

 
$
250

 
$
8,970

Construction/land/land development
2,805

 

 
1

 
(320
)
 
2,486

Residential real estate
5,003

 
13

 
37

 
856

 
5,883

Commercial and industrial
33,590

 
813

 
149

 
878

 
33,804

Mortgage warehouse lines of credit
139

 

 

 
(11
)
 
128

Consumer
276

 
22

 
6

 
84

 
344

Total
$
50,531

 
$
848

 
$
195

 
$
1,737

 
$
51,615

____________________________
(1) 
The $2.8 million provision for credit losses on the consolidated statements of income includes a $1.7 million net loan loss provision and a $1.1 million provision for off-balance sheet commitments for the three months ended March 31, 2017.


15

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



The following tables present the balance of loans receivable by method of impairment evaluation at the dates indicated:
 
March 31, 2018
(Dollars in thousands)
Period end allowance allocated to loans individually evaluated for impairment
 
Period end allowance allocated to loans collectively evaluated for impairment
 
Period end loan balance individually evaluated for impairment
 
Period ended loan balance collectively evaluated for impairment (1)
Loans secured by real estate:
 
 
 
 
 
 
 
Commercial real estate
$
1,448

 
$
8,696

 
$
10,236

 
$
1,066,284

Construction/land/land development
4

 
2,703

 
1,421

 
339,263

Residential real estate
28

 
5,443

 
7,498

 
575,963

Commercial and industrial
1,680

 
13,657

 
13,349

 
993,905

Mortgage warehouse lines of credit

 
158

 

 
191,154

Consumer
97

 
218

 
264

 
20,721

Total
$
3,257

 
$
30,875

 
$
32,768

 
$
3,187,290

____________________________
(1) 
Excludes $20.4 million and $5.5 million of commercial real estate loans and commercial and industrial loans, respectively, at fair value, which are not evaluated for impairment due to the fair value option election. See Note 5 - Fair Value of Financial Instruments for more information.
 
December 31, 2017
(Dollars in thousands)
Period end allowance allocated to loans individually evaluated for impairment
 
Period end allowance allocated to loans collectively evaluated for impairment
 
Period end loan balance individually evaluated for impairment
 
Period ended loan balance collectively evaluated for impairment (1)
Loans secured by real estate:
 
 
 
 
 
 
 
Commercial real estate
$
312

 
$
8,686

 
$
4,945

 
$
1,057,330

Construction/land/land development
4

 
2,946

 
1,963

 
320,441

Residential real estate
72

 
5,735

 
7,915

 
562,668

Commercial and industrial
4,356

 
14,475

 
24,598

 
959,011

Mortgage warehouse lines of credit

 
214

 

 
255,044

Consumer
63

 
220

 
237

 
20,268

Total
$
4,807

 
$
32,276

 
$
39,658

 
$
3,174,762

____________________________
(1) 
Excludes $21.0 million and $5.6 million of commercial real estate loans and commercial and industrial loans, respectively, at fair value, which are not evaluated for impairment due to the fair value option election. See Note 5 - Fair Value of Financial Instruments for more information.


16

ORIGIN BANCORP, INC.
Notes to Condensed Consolidated Financial Statements



The following tables present impaired loans at the dates indicated. No mortgage warehouse lines of credit were impaired at either March 31, 2018 or December 31, 2017.
 
March 31, 2018
(Dollars in thousands)
Unpaid contractual principal balance
 
Recorded investment with no allowance
 
Recorded investment with an allowance
 
Total recorded investment
 
Allocation of allowance for loan losses
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
11,166

 
$
1,973

 
$
8,263

 
$
10,236

 
$
1,448

Construction/land/land development
1,740

 
1,272

 
149

 
1,421

 
4

Residential real estate
9,656

 
6,636

 
862

 
7,498

 
28

Total real estate
22,562

 
9,881

 
9,274

 
19,155

 
1,480

Commercial and industrial
13,815

 
5,587

 
7,762

 
13,349

 
1,680

Consumer
289

 
123

 
141

 
264

 
97

Total impaired loans
$
36,666

 
$
15,591

 
$
17,177

 
$
32,768

 
$
3,257

 
December 31, 2017
(Dollars in thousands)
Unpaid contractual principal balance
 
Recorded investment with no allowance
 
Recorded investment with an allowance
 
Total recorded investment
 
Allocation of allowance for loan losses
Loans secured by real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
6,047

 
$
1,782

 
$
3,163

 
$
4,945

 
$
312

Construction/land/land development
2,268

 
1,813

 
150

 
1,963

 
4

Residential real estate
10,024