# Origin Bancorp, Inc. (OBK) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Origin Bancorp, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1516912/000151691225000064/obnk-20241231.htm
Accession: 0001516912-25-000064
Filing date: 2025-02-27
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/OBK/
All MD&A years: /company/OBK/mda/
Previous year: /company/OBK/mda/fy2023/ (FY 2023)
Next year: /company/OBK/mda/fy2025/ (FY 2025)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents our financial condition and results of operations on a consolidated basis. However, we conduct all of our material business operations through our wholly-owned bank subsidiary, Origin Bank, and the discussion and analysis that follows primarily relates to activities conducted at the Bank level.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained in Item 8 of this report. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.” We assume no obligation to update any of these forward-looking statements.

Discussion in this Form 10-K includes results of operations and financial condition for 2024 and 2023 and year-over-year comparisons between 2024 and 2023. For discussion on results of operations and financial condition pertaining to 2023 and 2022 and year-over-year comparisons between 2023 and 2022, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP and with general practices within the financial services industry. Application of these principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates. Please refer to Note 1 — Significant Accounting Policies to our consolidated financial statements contained in Item 8 of this report for a full discussion of our accounting policies, including estimates.

We have identified the following accounting estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those estimates and the potential sensitivity of the financial statements to those judgments and assumptions, are critical to an understanding of our financial condition and results of operations. We believe that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate.

Allowance for Loan Credit Losses. The allowance for loan credit losses (“ALCL”) represents the estimated losses for loans accounted for on an amortized cost basis. Expected losses are calculated using relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We evaluate loans held for investment (“LHFI”) on a pool basis with pools of loans characterized by loan type, collateral, industry, internal credit risk rating and FICO score. The amount of the ALCL is affected by loan charge-offs, which decrease the allowance, recoveries on loans previously charged off, which increase the allowance, as well as the provision for loan credit losses charged to income, which increases the allowance. In determining the provision for loan credit losses, management monitors fluctuations in the allowance resulting from actual charge-offs and recoveries and periodically reviews the size and composition of the loan portfolio in light of current and forecasted economic conditions. If actual losses exceed the amount of ALCL, it could materially and adversely affect our earnings. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Credit losses are charged against the ALCL when management believes the loss is confirmed.

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Loan Acquisition Accounting. We account for our mergers/acquisitions under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. The fair value for acquired loans at the time of acquisition or merger is based on a variety of factors, including discounted expected cash flows, adjusted for estimated prepayments and credit losses. In accordance with ASC 326, the fair value adjustment is recorded as premium or discount to the unpaid principal balance of each acquired loan. Loans that have been identified as having experienced a more-than-insignificant deterioration in credit quality since origination is a purchase credit deteriorated (“PCD”) loan. The net premium or discount on PCD loans is adjusted by the Company’s allowance for credit losses recorded at the time of merger/acquisition. The remaining net premium or discount is accreted or amortized into interest income over the remaining life of the loan using the effective interest rate method. The net premium or discount on loans that are not classified as PCD (“non-PCD”), that includes credit and non-credit components, is accreted or amortized into interest income over the remaining life of the loan using a constant yield method. We then record the necessary allowance for credit losses on the non-PCD loans through provision for loan credit losses expense.

General

We are a financial holding company headquartered in Ruston, Louisiana. Our wholly-owned bank subsidiary, Origin Bank, was founded in 1912 in Choudrant, Louisiana. Deeply rooted in our history is a culture committed to providing personalized, relationship banking to businesses, municipalities, and personal clients to enrich the lives of the people in the communities we serve. We provide a broad range of financial services and currently has over 60 locations from Dallas/Fort Worth, East Texas, Houston, across North Louisiana, Mississippi, South Alabama and into the Florida Panhandle. As a financial holding company operating through one segment, we generate the majority of our revenue from interest earned on loans and investments, service charges and fees on deposit accounts.

We incur interest expense on deposits and other borrowed funds and noninterest expense, such as salaries and employee benefits and occupancy expenses. We analyze our ability to maximize income generated from interest earning assets and expense of our liabilities through our net interest margin. Net interest margin is a ratio calculated as net interest income divided by average interest-earning assets. Net interest income is the difference between interest income on interest-earning assets, such as loans, securities and interest-bearing cash, and interest expense on interest-bearing liabilities, such as deposits and borrowings. Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

Changes in market interest rates and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as in the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and stockholders’ equity, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international conditions and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions, as well as developments affecting the real estate, technology, financial services, insurance, transportation and manufacturing sectors within our target markets.

Results of Operations

The year ended December 31, 2024, was impacted by certain questioned activity involving a former banker which is explained in detail in Part II, Item 8, Note 18 — Commitments and Contingencies under Loss Contingencies. These items negatively impacted our diluted EPS of $2.45 by $0.29 for the year ended December 31, 2024.

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Comparison of Results of Operations for the Years Ended December 31, 2024, 2023 and 2022

[[GREPCENT_TABLE]]
[["","At and for the Years Ended December 31,"],["(Dollars in thousands, except per share amounts)","2024","","2023","","2022"],["Net income","$","76,492","","","$","83,800","","","$","87,715"],["Financial ratios:"],["ROAA(1)","0.77","%","","0.84","%","","1.01","%"],["ROAE(1)","6.92","","","8.38","","","10.81"],["Capital ratio:"],["Book value per common share","$","36.71","","","$","34.30","","","$","30.90"],["____________________________(1)All average balances are calculated using average daily balances."]]
[[/GREPCENT_TABLE]]

Net Interest Income and Net Interest Margin

Net interest income for the year ended December 31, 2024, was $300.4 million, an increase of $809,000, or 0.3%, compared to the year ended December 31, 2023. The increase was primarily driven by a $50.5 million increase in interest income earned on LHFI and a $15.7 million decrease in interest expense incurred on Federal Home Loan Bank (“FHLB”) advance & other borrowings, offset by a $58.4 million increase in interest expense paid on interest-bearing deposits and a $6.5 million decrease in interest income earned on investment securities, during the year ended December 31, 2024, compared to the year ended December 31, 2023.

Interest income earned on LHFI during the year ended December 31, 2024, increased in substantially all loan categories when compared to the year ended December 31, 2023. Interest income earned on real estate-based loans, mortgage warehouse lines of credit and commercial and industrial loans contributed $32.4 million, $10.1 million and $8.0 million, respectively, of the $50.5 million total increase in interest income earned on LHFI when compared to the year ended December 31, 2023. Increases in interest rates drove $17.9 million, $5.5 million and $2.8 million of the increase in interest income earned on real estate-based loans, commercial and industrial loans, and mortgage warehouse lines of credit, and increases in average loan balances drove $14.6 million, $7.3 million and $2.5 million of the increase in interest income earned on real estate-based loans, mortgage warehouse lines of credit and commercial and industrial loans for the comparable periods, respectively.

The increase in average rates and average balances of interest-bearing deposits during the year ended December 31, 2024, contributed increases of $43.3 million and $15.1 million, respectively, to interest expense when compared to the year ended December 31, 2023. The average rate on interest-bearing deposits was 3.86% for the year ended December 31, 2024, an increase of 65 basis points, from 3.21% for the year ended December 31, 2023. The increase in average balances of interest-bearing deposits was primarily driven by a $296.2 million increase in average money market deposit balances.

Lower average balances in investment securities contributed a decrease of $7.7 million in interest income and the decrease in average balance in FHLB advances and other borrowings contributed a decrease of $15.5 million in interest expense, during the year ended December 31, 2024, compared to the year ended December 31, 2023, as a result of a strategic decision to sell available for sale securities to pay down borrowings and fund loan growth during the intervening period.

The Federal Reserve Board (“FRB”) sets various benchmark rates, including the federal funds rate, and thereby influences the general market rates of interest, including the loan and deposit rates offered by financial institutions. On September 18, 2024, the FRB reduced the federal funds target rate range by 50 basis points, to a range of 4.75% to 5.00%, marking the first rate reduction since early 2020. Prior to this movement, the fed funds rate was at a 23-year high, reflecting a total federal funds target rate range increase of 525 basis points since the FRB started raising rates in early 2022 through the last federal funds target rate range increase in mid-2023. During the second half of 2024, the federal funds target range has decreased 100 basis points from its cycle high with the current federal funds target range set to 4.25% to 4.50% on December 18, 2024. While the FRB has eased rates, the impact of higher interest rates for a sustained period of time continues to be reflected in our fully tax equivalent net interest margin (“NIM-FTE”) as well as in other financial metrics.

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The NIM-FTE was 3.22% for the year ended December 31, 2024, a one basis point decrease from 3.23% for the year ended December 31, 2023. The decrease was primarily due to a 51-basis point increase in the rate paid on interest-bearing liabilities to 3.88% for the year ended December 31, 2024, from 3.37% for year ended December 31, 2023, compared to a 42-basis point increase in the yield earned on interest-earning assets to 6.01% from 5.59%.

During the quarter ended December 31, 2024, we executed a bond portfolio optimization strategy aimed at enhancing long-term yields and improving overall portfolio performance. This strategy involved selling lower-yielding investment securities prior to their maturity and using the proceeds to purchase higher-yielding investments. As a result, we replaced securities with a total book value of $188.2 million and a weighted average yield of 1.51%, with new securities totaling $173.7 million with a weighted average yield of 5.22%, realizing a loss of $14.6 million. The weighted average duration of the securities portfolio increased to 4.46 years as of December 31, 2024, compared to 4.28 years as of December 31, 2023. Due to the timing of this transaction, the optimization positively impacted our NIM-FTE by one basis point for the year ended December 31, 2024, while on an annual basis, the estimated positive impact in NIM-FTE is seven basis points. While the associated loss, net of the increase in interest income, resulted in a $0.35 negative impact to diluted EPS for the year ended December 31, 2024, we believe the trade-off in yield represents an attractive opportunity with an estimated increase in annual net interest income of $5.6 million and earn-back period of 2.4 years.

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The following table presents average consolidated balance sheet information, interest income, interest expense and the corresponding average yields earned, and rates paid for the year ended December 31, 2024, 2023 and 2022.

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["(Dollars in thousands)Assets","Average Balance(1)","","Income/Expense","","Yield/Rate","","Average Balance(1)","","Income/Expense","","Yield/Rate","","Average Balance(1)","","Income/Expense","","Yield/Rate"],["Commercial real estate","$","2,485,800","","","$","146,507","","","5.89","%","","$","2,404,530","","","$","135,117","","","5.62","%","","$","1,951,246","","","$","88,175","","","4.52","%"],["Construction/land/land development","1,035,871","","","73,910","","","7.14","","","1,015,178","","","69,630","","","6.86","","","708,758","","","36,352","","","5.13"],["Residential real estate","1,799,963","","","98,732","","","5.49","","","1,629,589","","","81,964","","","5.03","","","1,143,190","","","49,635","","","4.34"],["Commercial and industrial","2,087,361","","","163,868","","","7.85","","","2,054,081","","","155,842","","","7.59","","","1,675,719","","","90,499","","","5.40"],["Mortgage warehouse lines of credit","420,665","","","31,587","","","7.51","","","314,079","","","21,476","","","6.84","","","420,639","","","18,732","","","4.45"],["Consumer","22,962","","","1,819","","","7.92","","","24,627","","","1,918","","","7.79","","","20,913","","","1,444","","","6.91"],["LHFI","7,852,622","","","516,423","","","6.58","","","7,442,084","","","465,947","","","6.26","","","5,920,465","","","284,837","","","4.81"],["Loans held for sale","13,306","","","858","","","6.45","","","18,055","","","868","","","4.81","","","32,272","","","1,313","","","4.07"],["Loans receivable","7,865,928","","","517,281","","","6.58","","","7,460,139","","","466,815","","","6.26","","","5,952,737","","","286,150","","","4.81"],["Investment securities-taxable","1,045,520","","","26,642","","","2.55","","","1,295,871","","","31,682","","","2.44","","","1,497,226","","","27,795","","","1.86"],["Investment securities-non-taxable","146,815","","","3,672","","","2.50","","","214,232","","","5,098","","","2.38","","","270,701","","","7,172","","","2.65"],["Non-marketable equity securities held in other financial institutions","62,579","","","2,417","","","3.86","","","67,956","","","3,408","","","5.01","","","58,441","","","1,802","","","3.08"],["Interest-earning deposits in banks","279,945","","","14,573","","","5.21","","","318,559","","","16,388","","","5.14","","","349,484","","","3,685","","","1.05"],["Total interest-earning assets","9,400,787","","","564,585","","","6.01","","","9,356,757","","","523,391","","","5.59","","","8,128,589","","","326,604","","","4.02"],["Noninterest-earning assets","557,803","","","","","","","584,263","","","","","","","557,642"],["Total assets","$","9,958,590","","","","","","","$","9,941,020","","","","","","","$","8,686,231"],["Liabilities and Stockholders\u2019 Equity"],["Liabilities"],["Interest-bearing liabilities"],["Savings and interest-bearing transaction accounts","$","5,164,991","","","$","191,620","","","3.71","%","","$","4,725,929","","","$","144,324","","","3.05","%","","$","4,066,981","","","$","29,025","","","0.71","%"],["Time deposits","1,444,954","","","63,253","","","4.38","","","1,398,734","","","52,133","","","3.73","","","616,197","","","4,484","","","0.73"],["Total interest-bearing deposits","6,609,945","","","254,873","","","3.86","","","6,124,663","","","196,457","","","3.21","","","4,683,178","","","33,509","","","0.72"],["FHLB advances & other borrowings","34,203","","","1,602","","","4.68","","","327,792","","","17,258","","","5.26","","","444,426","","","9,411","","","2.12"],["Subordinated indebtedness","161,232","","","7,744","","","4.80","","","198,856","","","10,119","","","5.09","","","176,028","","","8,406","","","4.78"],["Total interest-bearing liabilities","6,805,380","","","264,219","","","3.88","","","6,651,311","","","223,834","","","3.37","","","5,303,632","","","51,326","","","0.97"],["Noninterest-bearing liabilities"],["Noninterest-bearing deposits","1,887,884","","","","","","","2,147,019","","","","","","","2,422,132"],["Other liabilities","159,676","","","","","","","142,786","","","","","","","148,984"],["Total liabilities","8,852,940","","","","","","","8,941,116","","","","","","","7,874,748"],["Stockholders\u2019 Equity","1,105,650","","","","","","","999,904","","","","","","","811,483"],["Total liabilities and stockholders\u2019 equity","$","9,958,590","","","","","","","$","9,941,020","","","","","","","$","8,686,231"],["Net interest spread","","","","","2.13","%","","","","","","2.22","%","","","","","","3.05","%"],["Net interest income and margin","","","$","300,366","","","3.20","","","","","$","299,557","","","3.20","","","","","$","275,278","","","3.39"],["Net interest income and margin - (tax equivalent)(2)","","","$","302,405","","","3.22","","","","","$","302,132","","","3.23","","","","","$","278,403","","","3.42"]]
[[/GREPCENT_TABLE]]

____________________________

(1)Nonaccrual loans are included in their respective loan category for the purpose of calculating the yield earned. All average balances are daily average balances.

(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 and income from tax-exempt investments, and tax credits were computed using a federal income tax rate of 21%.

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Rate/Volume Analysis

The following tables present the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and those due to changes in interest rates. The change in interest attributable to rate changes has been determined by applying the change in rate between periods to average balances outstanding in the earlier period. The change in interest due to volume has been determined by applying the rate from the earlier period to the change in average balances outstanding between periods. For purposes of the below table, changes attributable to both rate and volume that cannot be segregated, including the difference in day count, have been allocated to rate.

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2024 vs. Year Ended December 31, 2023"],["(Dollars in thousands)Interest-earning assets","Increase (Decrease) due to Change in"],["Loans:","Volume","","Yield/Rate","","Total Change"],["Commercial real estate","$","4,567","","","$","6,823","","","$","11,390"],["Construction/land/land development","1,419","","","2,861","","","4,280"],["Residential real estate","8,569","","","8,199","","","16,768"],["Commercial and industrial","2,525","","","5,501","","","8,026"],["Mortgage warehouse lines of credit","7,288","","","2,823","","","10,111"],["Consumer","(130)","","","31","","","(99)"],["Loans held for sale","(228)","","","218","","","(10)"],["Loans receivable","24,010","","","26,456","","","50,466"],["Investment securities-taxable","(6,121)","","","1,081","","","(5,040)"],["Investment securities-non-taxable","(1,604)","","","178","","","(1,426)"],["Non-marketable equity securities held in other financial institutions","(270)","","","(721)","","","(991)"],["Interest-earning deposits in banks","(1,986)","","","171","","","(1,815)"],["Total interest-earning assets","14,029","","","27,165","","","41,194"],["Interest-bearing liabilities"],["Savings and interest-bearing transaction accounts","13,408","","","33,888","","","47,296"],["Time deposits","1,723","","","9,397","","","11,120"],["FHLB advances & other borrowings","(15,457)","","","(199)","","","(15,656)"],["Subordinated indebtedness","(1,915)","","","(460)","","","(2,375)"],["Total interest-bearing liabilities","(2,241)","","","42,626","","","40,385"],["Net interest income","$","16,270","","","$","(15,461)","","","$","809"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2023 vs. Year Ended December 31, 2022"],["(Dollars in thousands)Interest-earning assets","Increase (Decrease) due to Change in"],["Loans:","Volume","","Yield/Rate","","Total Change"],["Commercial real estate","$","20,483","","","$","26,459","","","$","46,942"],["Construction/land/land development","15,716","","","17,562","","","33,278"],["Residential real estate","21,118","","","11,211","","","32,329"],["Commercial and industrial","20,434","","","44,909","","","65,343"],["Mortgage warehouse lines of credit","(4,745)","","","7,489","","","2,744"],["Consumer","256","","","218","","","474"],["Loans held for sale","(578)","","","133","","","(445)"],["Loans receivable","72,684","","","107,981","","","180,665"],["Investment securities-taxable","(3,738)","","","7,625","","","3,887"],["Investment securities-non-taxable","(1,496)","","","(578)","","","(2,074)"],["Non-marketable equity securities held in other financial institutions","293","","","1,313","","","1,606"],["Interest-earning deposits in banks","(326)","","","13,029","","","12,703"],["Total interest-earning assets","67,417","","","129,370","","","196,787"],["Interest-bearing liabilities"],["Savings and interest-bearing transaction accounts","4,703","","","110,596","","","115,299"],["Time deposits","5,694","","","41,955","","","47,649"],["FHLB advances & other borrowings","(2,470)","","","10,317","","","7,847"],["Subordinated indebtedness","1,090","","","623","","","1,713"],["Total interest-bearing liabilities","9,017","","","163,491","","","172,508"],["Net interest income","$","58,400","","","$","(34,121)","","","$","24,279"]]
[[/GREPCENT_TABLE]]

Provision for Credit Losses

We recorded a provision expense of $7.4 million for the year ended December 31, 2024, a $9.3 million decrease from $16.8 million for the year ended December 31, 2023, primarily driven by a $8.8 million decrease in the provision for loan credit losses.

The net decrease in provision expense for loan credit losses for the year ended December 31, 2024, compared to the year ended December 31, 2023, was mainly due to decreases of $8.5 million and $7.1 million in collectively and individually evaluated reserves, respectively, which decreases were offset by the $4.1 million provision increase associated with the questioned activity recognized during the year ended December 31, 2024, as discussed in detail in Part II, Item 8, Note 18 — Commitments and Contingencies under Loss Contingencies.

During the period, we experienced a $6.7 million increase in net charge-offs. The increase in charge-offs was mainly driven by charge-offs relating to four commercial and industrial relationships totaling $15.2 million during the year ended December 31, 2024, compared to four commercial and industrial relationships totaling $6.8 million being the major driver for charge-offs during the year ended December 31, 2023. The increase in charge-offs was partially offset by increase in recoveries on two commercial and industrial relationships totaling $4.6 million during the year ended December 31, 2024.

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Noninterest Income

The table below presents the various components of and changes in our noninterest income for the periods indicated.

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","Years Ended December 31,","","","","2024 vs. 2023","","2023 vs. 2022"],["Noninterest income:","2024","","2023","","","2022","","","","","","$ Change","","% Change","","$ Change","","% Change"],["Insurance commission and fee income","$","26,759","","","$","25,085","","","","$","22,869","","","","","","","$","1,674","","","6.7","%","","$","2,216","","","9.7","%"],["Service charges and fees","19,015","","","18,803","","","","17,669","","","","","","","212","","","1.1","","","1,134","","","6.4"],["Other fee income","8,917","","","8,089","","","","7,279","","","","","","","828","","","10.2","","","810","","","11.1"],["Mortgage banking revenue","6,580","","","3,356","","","","6,722","","","","","","","3,224","","","96.1","","","(3,366)","","","(50.1)"],["Swap fee income","323","","","1,277","","","","457","","","","","","","(954)","","","(74.7)","","","820","","","N/M"],["(Loss) gain on sales of securities, net","(14,799)","","","(11,635)","","","","1,664","","","","","","","(3,164)","","","27.2","","","(13,299)","","","N/M"],["Change in fair value of equity investments","5,188","","","10,096","","","","\u2014","","","","","","","(4,908)","","","(48.6)","","","10,096","","","N/A"],["Other income","3,396","","","3,264","","","","614","","","","","","","132","","","4.0","","","2,650","","","N/M"],["Total noninterest income","$","55,379","","","$","58,335","","","","$","57,274","","","","","","","$","(2,956)","","","(5.1)","","","$","1,061","","","1.9"]]
[[/GREPCENT_TABLE]]
____________________________

N/M = Not meaningful.

N/A = Not applicable.

Noninterest income for the year ended December 31, 2024, decreased by $3.0 million, or 5.1%, to $55.4 million, compared to $58.3 million for the year ended December 31, 2023. The decrease was primarily due to a decrease of $4.9 million in the change in fair value of equity investments and a $3.2 million increase in loss on sales of securities, net, partially offset by increases of $3.2 million and $1.7 million in mortgage banking revenue and insurance commission and fee income, respectively.

Change in fair value of equity investments. The decrease in change in fair value of equity investments was primarily due to a $5.2 million positive valuation adjustment on a non-marketable equity security during the year ended December 31, 2024, which was more than offset by a $10.1 million positive valuation adjustment on the same non-marketable equity security that occurred during the year ended December 31, 2023. During the years ended December 31, 2024 and 2023, we observed multiple orderly transactions for this equity security indicating a price change had occurred and adjusted our basis upwards accordingly.

Mortgage banking revenue. The $3.2 million increase in mortgage banking revenue compared to the year ended December 31, 2023, was primarily driven by a $1.8 million increase in gain on sale of loans held for sale primarily due to higher profit margins and increased sales volume, and a net $1.3 million increase in mortgage banking revenue caused by $1.8 million MSR asset impairment recorded during the year ended December 31, 2023, which was offset by a $410,000 gain on sale of the MSR asset during the year ended December 31, 2024.

Loss on sales of securities, net. The $3.2 million increase in loss on sales of securities, net, was mainly driven by a $14.6 million loss recognized in the last quarter of 2024 as a result of our bond portfolio optimization strategy transaction. This was partially offset by a $11.8 million loss recognized in the second half of 2023, resulting from a strategic decision to use securities sale proceeds to pay down FHLB advances and support loan growth in our markets.

Insurance commission and fee income. The $1.7 million increase in insurance commission and fee income was mainly due to increases in both direct bill commission and contingency income. The increase in direct bill commission was mainly driven by higher commissions from property and casualty insurance. The increase in contingency income was mainly due to new commercial accounts combined with lower claims for catastrophic events experienced by our insurance agency counterparties during the year ended December 31, 2024, compared to the year ended December 31, 2023.

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Noninterest Expense

The following table presents the significant components of noninterest expense for the periods indicated:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","Years Ended December 31,","","2024 vs. 2023","","2023 vs. 2022"],["Noninterest expense:","2024","","2023","","2022","","$ Change","","% Change","","$ Change","","% Change"],["Salaries and employee benefits","$","148,823","","","$","138,819","","","$","118,971","","","$","10,004","","","7.2","%","","$","19,848","","","16.7","%"],["Occupancy and equipment, net","27,865","","","26,783","","","20,203","","","1,082","","","4.0","","","6,580","","","32.6"],["Data processing","13,497","","","11,590","","","10,456","","","1,907","","","16.5","","","1,134","","","10.8"],["Office and operations","11,441","","","10,834","","","8,120","","","607","","","5.6","","","2,714","","","33.4"],["Intangible asset amortization","7,979","","","9,628","","","5,488","","","(1,649)","","","(17.1)","","","4,140","","","75.4"],["Regulatory assessments","6,902","","","6,456","","","3,547","","","446","","","6.9","","","2,909","","","82.0"],["Advertising and marketing","6,150","","","5,986","","","4,431","","","164","","","2.7","","","1,555","","","35.1"],["Professional services","6,610","","","5,931","","","3,813","","","679","","","11.4","","","2,118","","","55.5"],["Loan-related expenses","3,164","","","5,035","","","6,097","","","(1,871)","","","(37.2)","","","(1,062)","","","(17.4)"],["Electronic banking","5,162","","","4,712","","","3,958","","","450","","","9.6","","","754","","","19.1"],["Franchise tax expense","2,897","","","3,334","","","3,582","","","(437)","","","(13.1)","","","(248)","","","(6.9)"],["Merger-related expense","\u2014","","","\u2014","","","6,171","","","\u2014","","","N/A","","(6,171)","","","(100.0)"],["Other expense","10,548","","","6,108","","","5,582","","","4,440","","","72.7","","","526","","","9.4"],["Total noninterest expense","$","251,038","","","$","235,216","","","$","200,419","","","$","15,822","","","6.7","","","$","34,797","","","17.4"]]
[[/GREPCENT_TABLE]]

____________________________

N/A = Not applicable.

Noninterest expense for the year ended December 31, 2024, increased by $15.8 million, or 6.7%, to $251.0 million, compared to $235.2 million for the year ended December 31, 2023, primarily due to increases of $10.0 million, $4.4 million $1.9 million and $1.1 million in salaries and employee benefits, other noninterest, data processing and occupancy and equipment, net expenses, respectively. These increases were partially offset by decreases of $1.9 million and $1.6 million in loan-related expenses and intangible asset amortization, respectively.

Salaries and employee benefits. The $10.0 million increase in salaries and employee benefits expense was primarily driven by increases of $6.6 million, $2.0 million, $1.7 million, and $1.5 million in salary expense, incentive compensation bonus, share-based compensation, and medical insurance expenses respectively. The increase was partially offset by an employee retention credit (“ERC”) of $1.7 million that was recorded during the year ended December 31, 2024, and related to the operations of BTH Bank, N.A., which we acquired in 2022. The ERC is a refundable tax credit for certain eligible businesses that had employees affected during the COVID-19 pandemic. The increase in salary expense was mainly attributed to raises given as a result of our annual salary reviews combined with an increase driven by our entry into South Alabama and the Florida Panhandle markets during 2024. The increase in incentive compensation bonuses can be attributed primarily to elevated anticipated payouts, driven by a greater focus on meeting deposit objectives. This is evidenced by a larger sum of incentives linked to these deposit goals, alongside an increase in accruals associated with financial targets for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase in share-based compensation was primarily due to evaluation adjustments on performance stock units to align with payout expectations based on company performance. Medical insurance expense increased as a result of higher insurance premiums combined with higher self-insurance claims during the current period.

Other noninterest expense. The $4.4 million increase in other noninterest expense was primarily due to $4.3 million in contingency expense related to certain questioned activity involving a former banker in our East Texas market, as explained in detail in Part II, Item 8, Note 18 — Commitments and Contingencies under Loss Contingencies.

Data Processing. The $1.9 million increase in data processing expense was primarily due to an increase of $1.1 million in software expenses, primarily driven by new services and increased fees for the year ended December 31, 2024, compared to the year ended December 31, 2023. Also, contributing a combined increase of $749,000 were increased expenses associated with core services, compliance systems and data processing costs.

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Occupancy and equipment, net. The $1.1 million increase in occupancy and equipment, net was primarily due to an increase in expense associated with the accounting for our strategic profitability initiative which includes consolidation of eight banking centers, five in the Dallas-Fort Worth market, with one each in the Houston, Louisiana and Mississippi markets. We expect to close six of these banking centers at the end of February 2025, which combined with the two branch closures that occurred mid-year 2024, is expected to reduce our occupancy expense by approximately $4.6 million annually.

Loan-related expenses. The $1.9 million decrease in loan-related expenses was primarily due to decreases of $675,000 and $630,000 in loan related legal fees and servicing costs, respectively.

Intangible asset amortization. The $1.6 million decrease in intangible asset amortization is primarily due to the accelerated amortization method used to measure the amortization expense of the assets, as well as certain intangible assets that were fully amortized during the year ended December 31, 2023.

Income Tax Expense

For the year ended December 31, 2024, we recognized income tax expense of $20.8 million, compared to $22.1 million for the year ended December 31, 2023. Our effective tax rate was 21.4% for the year ended December 31, 2024, compared to 20.9% for the year ended December 31, 2023.

Comparison of Financial Condition at December 31, 2024, and December 31, 2023

General

Total assets decreased by $43.9 million, or 0.5%, to $9.68 billion at December 31, 2024, from $9.72 billion at December 31, 2023. The decrease in total assets is primarily due to decreases of $151.1 million and $87.2 million in available for sale securities and LHFI, respectively. These decreases were partially offset by an increase of $189.8 million in cash and cash equivalents. LHFI were $7.57 billion at December 31, 2024, a decrease of 1.1%, compared to $7.66 billion at December 31, 2023. Available for sale securities declined to $1.10 billion, reflecting a 12.1% decrease, at December 31, 2024, compared to $1.25 billion at December 31, 2023. Cash and cash equivalents increased to $470.2 million, an increase of 67.7%, at December 31, 2024, compared to $280.4 million at December 31, 2023.

Total liabilities decreased by $126.2 million, or 1.5%, to $8.53 billion at December 31, 2024, from $8.66 billion at December 31, 2023. Federal Home Loan Bank advances, repurchase obligations and other borrowings decreased $71.1 million, or 85.1%, to $12.5 million at December 31, 2024, from $83.6 million at December 31, 2023. Subordinated debentures decreased $34.3 million, or 17.7%, to $159.9 million at December 31, 2024, from $194.3 million at December 31, 2023. Total deposits decreased by $28.0 million, or 0.3%, to $8.22 billion at December 31, 2024, from $8.25 billion at December 31, 2023, primarily due to a decrease of $364.8 million in brokered deposits, which was partially offset by increases of $184.6 million and $157.9 million and interest-bearing demand and money market deposits, respectively.

Loan Portfolio

Our loan portfolio is our largest category of interest-earning assets, and interest income earned on our loan portfolio is our primary source of income. At December 31, 2024, 75.2% of the loan portfolio held for investment was comprised of commercial and industrial loans, including mortgage warehouse lines of credit, commercial real estate and construction/land/land development loans, which were primarily originated within our legacy market areas of Texas, North Louisiana, and Mississippi, compared to 77.1% at December 31, 2023.

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The following table presents the ending balance of our loan portfolio held for investment at the dates indicated.

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","December 31, 2024","","December 31, 2023","","2024 vs. 2023"],["Real estate:","Amount","","Percent","","Amount","","Percent","","$ Change","","% Change"],["Commercial real estate (\u201cCRE\u201d)(1)","$","2,477,431","","","32.7","%","","$","2,442,734","","","31.9","%","","$","34,697","","","1.4","%"],["Construction/land/land development","864,011","","","11.4","","","1,070,225","","","14.0","","","(206,214)","","","(19.3)"],["Residential real estate","1,857,589","","","24.5","","","1,734,935","","","22.6","","","122,654","","","7.1"],["Total real estate","5,199,031","","","68.6","","","5,247,894","","","68.5","","","(48,863)","","","(0.9)"],["Commercial and industrial","2,002,634","","","26.5","","","2,059,460","","","26.9","","","(56,826)","","","(2.8)"],["Mortgage warehouse lines of credit","349,081","","","4.6","","","329,966","","","4.3","","","19,115","","","5.8"],["Consumer","22,967","","","0.3","","","23,624","","","0.3","","","(657)","","","(2.8)"],["Total LHFI","$","7,573,713","","","100.0","%","","$","7,660,944","","","100.0","%","","$","(87,231)","","","(1.1)"]]
[[/GREPCENT_TABLE]]
______________________

(1)Includes owner-occupied CRE of $975.9 million and $953.8 million at December 31, 2024 and December 31, 2023, respectively.

At December 31, 2024, total LHFI were $7.57 billion, a decrease of $87.2 million, or 1.1%, compared to $7.66 billion at December 31, 2023. The decrease was primarily driven by a decline of $206.2 million in construction/land/land development loans, which was partially offset by an increase of $122.7 million in residential real estate loans. Total LHFI at December 31, 2024, excluding mortgage warehouse lines of credit, were $7.22 billion, reflecting a decrease of $106.3 million, or 1.5%, compared to December 31, 2023.

A significant portion, 32.7%, of our LHFI portfolio at December 31, 2024, consisted of CRE loans secured by real estate properties. Such loans can involve high principal loan amounts, and the repayment of these loans is dependent, in large part, on a borrower’s ongoing business operations or on income generated from the properties that are leased to third parties.

The table below sets forth the CRE loan portfolio, by portfolio industry sector and collateral location as of December 31, 2024.

[[GREPCENT_TABLE]]
[["","December 31, 2024"],["(Dollars in thousands)","Texas","","Louisiana","","Mississippi","","All Other States","","Total"],["Non-owner occupied CRE:"],["Office building","$","276,409","","","$","22,101","","","$","34,535","","","$","17,930","","","$","350,975"],["Retail shopping","251,607","","","39,501","","","33,156","","","92,508","","","416,772"],["Real estate & construction","165,801","","","50,533","","","5,406","","","39,993","","","261,733"],["Healthcare","71,378","","","45,065","","","5,734","","","27,131","","","149,308"],["Hotels","3,348","","","50,656","","","35,095","","","9,246","","","98,345"],["All other sectors","145,493","","","11,865","","","9,184","","","57,809","","","224,351"],["Total non-owner occupied CRE","914,036","","","219,721","","","123,110","","","244,617","","","1,501,484"],["Owner occupied CRE:"],["Real estate & construction","173,736","","","46,545","","","17,357","","","13,714","","","251,352"],["Retail shopping","121,840","","","15,380","","","643","","","1,812","","","139,675"],["Consumer Services","45,474","","","15,076","","","257","","","\u2014","","","60,807"],["Entertainment & Recreation","37,562","","","22,954","","","10,167","","","\u2014","","","70,683"],["All other sectors","252,176","","","120,035","","","25,665","","","55,554","","","453,430"],["Total owner occupied CRE","630,788","","","219,990","","","54,089","","","71,080","","","975,947"],["Total CRE loans","$","1,544,824","","","$","439,711","","","$","177,199","","","$","315,697","","","$","2,477,431"]]
[[/GREPCENT_TABLE]]

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Loan Portfolio Maturity Analysis

The table below presents the maturity distribution of our LHFI at December 31, 2024. The table also presents the portion of our loans that have fixed interest rates, rather than interest rates that fluctuate over the life of the loans, based on changes in the interest rate environment.

[[GREPCENT_TABLE]]
[["","December 31, 2024"],["(Dollars in thousands)","One Year or Less","","After One Year Through Five Years","","After Five Years Through Fifteen Years","","After Fifteen Years","","Total"],["Real estate:"],["Commercial real estate","$","410,216","","","$","1,768,831","","","$","287,801","","","$","10,583","","","$","2,477,431"],["Construction/land/land development","333,071","","","471,091","","","40,870","","","18,979","","","864,011"],["Residential real estate","226,142","","","729,610","","","71,963","","","829,874","","","1,857,589"],["Total real estate","969,429","","","2,969,532","","","400,634","","","859,436","","","5,199,031"],["Commercial and industrial","816,912","","","1,099,521","","","86,114","","","87","","","2,002,634"],["Mortgage warehouse lines of credit","349,081","","","\u2014","","","\u2014","","","\u2014","","","349,081"],["Consumer","8,025","","","14,048","","","402","","","492","","","22,967"],["Total LHFI","$","2,143,447","","","$","4,083,101","","","$","487,150","","","$","860,015","","","$","7,573,713"],["Amounts with fixed rates","$","493,594","","","$","2,141,510","","","$","313,901","","","$","186,192","","","$","3,135,197"],["Amounts with variable rates","1,649,853","","","1,941,591","","","173,249","","","673,823","","","4,438,516"],["Total","$","2,143,447","","","$","4,083,101","","","$","487,150","","","$","860,015","","","$","7,573,713"]]
[[/GREPCENT_TABLE]]

Nonperforming Assets

Nonperforming assets consist of nonperforming/nonaccrual loans and property acquired through foreclosures or repossession, as well as bank-owned property not in use and listed for sale.

Loans are placed on nonaccrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions, and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans may be placed on nonaccrual status even if the contractual payments are not past due if information becomes available that causes substantial doubt about the borrower’s ability to meet the contractual obligations of the loan. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Past due status is based on the contractual terms of the loan. Interest income on nonaccrual loans may be recognized to the extent cash payments are received, but payments received are usually applied to principal. Nonaccrual loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. If a loan is determined by management to be uncollectible, regardless of size, the portion of the loan determined to be uncollectible is then charged to the ALCL.

Purchased loans that have experienced more than insignificant credit deterioration since origination are purchased credit deteriorated (“PCD”) loans. The Company evaluates acquired loans for deterioration in credit quality based on any of, but not limited to, the following: (1) nonaccrual status; (2) borrowers are experiencing financial difficulty which results in modification to the loan terms; (3) risk ratings of special mention, substandard or doubtful; (4) watchlist credits; and (5) delinquency status, including loans that are current on merger/acquisition date, but had previously been 60 days delinquent twice. An allowance for credit losses is determined using the same methodology as other individually evaluated loans. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses. We held approximately $12.3 million of unpaid principal balance PCD loans at December 31, 2024, and $34.8 million of unpaid principal balance PCD loans at December 31, 2023.

We manage the quality of our lending portfolio in part through a disciplined underwriting policy and through continual monitoring of loan performance and borrowers’ financial condition. There can be no assurance, however, that our loan portfolio will not become subject to losses due to declines in economic conditions or deterioration in the financial condition of our borrowers.

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The following table shows our nonperforming loans and nonperforming assets at the dates indicated:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)"],["Nonperforming LHFI:","","","","","December 31, 2024","","December 31, 2023"],["Commercial real estate","","","","","$","4,974","","","$","786"],["Construction/land/land development","","","","","18,505","","","305"],["Residential real estate","","","","","36,221","","","13,037"],["Commercial and industrial","","","","","15,120","","","15,897"],["Consumer","","","","","182","","","90"],["Total nonperforming LHFI","","","","","75,002","","","30,115"],["Other real estate owned:"],["Commercial real estate, construction/land/land development","","","","","1,340","","","3,068"],["Residential real estate","","","","","1,261","","","846"],["Former Bank premises","","","","","1,034","","","\u2014"],["Total other real estate owned","","","","","3,635","","","3,914"],["Other repossessed assets owned","","","","","\u2014","","","15"],["Total repossessed assets owned","","","","","3,635","","","3,929"],["Total nonperforming assets","","","","","$","78,637","","","$","34,044"],["Total LHFI","","","","","$","7,573,713","","","$","7,660,944"],["Ratio of nonperforming LHFI to total LHFI","","","","","0.99","%","","0.39","%"],["Ratio of nonperforming assets to total assets","","","","","0.81","","","0.35"]]
[[/GREPCENT_TABLE]]

As explained in detail in Part II, Item 8, Note 18 — Commitments and Contingencies under Loss Contingencies, our credit metrics were negatively impacted by certain questioned activity involving a former banker in our East Texas market. Our investigation of this activity remains ongoing and is not final. The Company continues to work with a third-party forensic accounting team to confirm the Bank’s identification and reconciliation of the activity, and also to assist in evaluating any additional impact from the questioned activity. At this time, we believe that any ultimate loss arising from the situation will not be material to our financial position.

Nonperforming LHFI increased $44.9 million at December 31, 2024, compared to December 31, 2023, and nonperforming LHFI to LHFI increased to 0.99% compared to 0.39%. The $44.9 million increase in non-performing loans was primarily driven by one loan relationship totaling $29.0 million impacted by the questioned loan activity mentioned above. Also contributing to the increase in nonperforming LHFI at December 31, 2024, compared to December 31, 2023, were three residential real estate loan relationships totaling $9.7 million. Please see Note 4 — Loans to our consolidated financial statements contained in Part II, Item 8 of this report for more information on nonperforming loans.

The steep incline in the interest rate environment over the last several years driven by the FRB’s federal funds rate setting policy, as outlined in the Results of Operations section above, has negatively impacted borrowers with variable or floating rate loans causing their cost of borrowings to increase significantly since mid-2022. This has put pressure on borrower’s cash flow and contributed to higher overall nonperforming loans at December 31, 2024, compared to December 31, 2023.

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Potential Problem Loans

From a credit risk standpoint, we classify loans using risk grades which fall into one of five categories: pass, special mention, substandard, doubtful or loss. The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. We review the ratings on loans and adjust them to reflect the degree of risk and loss that is felt to be inherent or expected in each loan. The methodology is structured so that reserve allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss). Loans rated special mention reflect borrowers who exhibit credit weaknesses or downward trends deserving close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date. While potentially weak these borrowers currently do not pose sufficient risk to warrant adverse classification. Loans rated substandard are those borrowers with deteriorating trends and well-defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower might be in jeopardy.

Loans rated as doubtful have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable, and there is a high probability of loss based on currently existing facts, conditions and values. Loans classified as loss are charged-off and we have low expectations for the recovery of any payments in respect to loans rated as loss. Information regarding the internal risk ratings of our loans at December 31, 2024, is included in Note 4 — Loans to our consolidated financial statements contained in Part II, Item 8 of this report.

Allowance for Loan Credit Losses

The ALCL represents the estimated losses for loans accounted for on an amortized cost basis. Expected losses are calculated using relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We evaluate LHFI on a pool basis with pools of loans characterized by loan type, collateral, industry, internal credit risk rating and FICO score. We applied a probability of default, loss given default loss methodology to the loan pools at December 31, 2024. Historical loss rates for each pool are calculated based on charge-off and recovery data beginning with the second quarter of 2012. These loss rates are adjusted for the effects of certain economic variables forecast over a one-year period, particularly for differences between current period conditions and the conditions existing during the historical loss period. Subsequent to the forecast effects, historical loss rates are used to estimate losses over the estimated remaining lives of the loans. The estimated remaining lives consist of the contractual lives, adjusted for estimated prepayments. Loans that exhibit characteristics different from their pool characteristics are evaluated on an individual basis. Certain of these loans are considered to be collateral dependent, with the borrower experiencing financial difficulty. For these loans, the fair value of collateral practical expedient is elected whereby the allowance is calculated as the amount by which the amortized cost exceeds the fair value of collateral, less costs to sell (if applicable). Those individual loans that are not collateral dependent are evaluated based on a discounted cash flow methodology.

The amount of the ALCL is affected by loan charge-offs, which decrease the allowance, recoveries on loans previously charged off, which increase the allowance, as well as the provision for loan credit losses charged to income, which increases the allowance. In determining the provision for loan credit losses, management monitors fluctuations in the allowance resulting from actual charge-offs and recoveries and periodically reviews the size and composition of the loan portfolio in light of current and forecasted economic conditions. If actual losses exceed the amount of the ALCL, it would materially and adversely affect our earnings.

Acquisition Accounting and Acquired Loans. We account for our mergers/acquisitions under Financial Accounting Standards Board (“FASB”) ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with ASC 326, we record a discount or premium, and also an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An ALCL is determined using the same methodology as other individually evaluated loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized or accreted into interest income over the life of the loan. Subsequent changes to the ALCL are recorded through the provision for credit losses.

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As a general rule, when it becomes evident that the full principal and accrued interest of a loan may not be collected, or at 90 days past due, we will reflect that loan as nonperforming. It will remain nonperforming until it performs in a manner that it is reasonable to expect that we will collect principal and accrued interest in full. When the amount or likelihood of a loss on a loan has been confirmed, a charge-off will be taken in the period it is determined.

We establish general allocations for each major loan category and credit quality. The general allocation is based, in part, on historical charge-off experience and loss given default methodology, derived from our internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. We give consideration to trends, changes in loan mix, delinquencies, prior losses, reasonable and supportable forecasts and other related information.

In connection with the review of our loan portfolio, we consider risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements we consider include:

•for commercial real estate loans, the debt service coverage ratio, operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type;

•for construction, land and land development loans, the perceived feasibility of the project, including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio;

•for residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral; and

•for commercial and industrial loans, the debt service coverage ratio (income from the business in excess of operating expenses compared to loan repayment requirements), the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral.

•for mortgage warehouse loans, the borrower’s adherence to agency or investor underwriting guidelines, while the risk associated with the underlying consumer mortgage loan repayments, similar to other consumer loans, depends on the borrower’s financial stability and are more likely than commercial loans to be adversely affected by divorce, job loss, illness and other personal hardships.

[[GREPCENT_TABLE]]
[["The following table presents the allowance for credit loss by loan category:"],["","December 31,"],["(Dollars in thousands)","2024","","2023"],["Loans secured by real estate:","Amount","","%(1)","","Amount","","%(1)"],["Commercial real estate","$","16,546","","","32.7","%","","$","19,625","","","31.9","%"],["Construction/land/land development","7,398","","","11.4","","","9,990","","","14.0"],["Residential real estate","12,454","","","24.5","","","10,619","","","22.6"],["Commercial and industrial","53,449","","","26.5","","","55,330","","","26.9"],["Mortgage warehouse lines of credit","501","","","4.6","","","529","","","4.3"],["Consumer","712","","","0.3","","","775","","","0.3"],["Total","$","91,060","","","100.0","%","","$","96,868","","","100.0","%"]]
[[/GREPCENT_TABLE]]

___________________________

(1)Represents the ratio of each loan type to total LHFI.

Our ALCL decreased by $5.8 million, or 6.0%, to $91.1 million at December 31, 2024, from $96.9 million at December 31, 2023. Changes in qualitative factors across the Company's risk pools drove a $2.6 million decline in the ALCL, driven primarily by an improved economic outlook, including lower interest rate pressures and stabilizing market conditions. The allowance for individually evaluated loans contributing another $2.7 million of the decrease for the year ended December 31, 2024, when compared to the year ended December 31, 2023. The ratio of ALCL to total LHFI decreased to 1.20% at December 31, 2024, compared to 1.26% at December 31, 2023.

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The following table presents an analysis of the ALCL and other related data at the periods indicated.

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","Years Ended December 31,"],["ALCL","2024","","2023"],["Balance at beginning of year","$","96,868","","","$","87,161"],["Provision for loan credit losses","8,680","","","17,514"],["Charge-offs:"],["Commercial real estate","480","","","42"],["Residential real estate","11","","","27"],["Commercial and industrial","22,787","","","11,833"],["Consumer","362","","","147"],["Total charge-offs","23,640","","","12,049"],["Recoveries:"],["Commercial real estate","530","","","140"],["Construction/land/land development","\u2014","","","3"],["Residential real estate","16","","","17"],["Commercial and industrial","8,583","","","4,068"],["Consumer","23","","","14"],["Total recoveries","9,152","","","4,242"],["Net charge-offs","14,488","","","7,807"],["Balance at end of year","$","91,060","","","$","96,868"],["Ratio of ALCL to:"],["Nonperforming LHFI","121.41","%","","321.66","%"],["LHFI","1.20","","","1.26"],["Net charge-offs as a percentage of:"],["Provision for loan credit losses","166.91","","","44.58"],["ALCL","15.91","","","8.06"],["Average LHFI","0.18","","","0.10"]]
[[/GREPCENT_TABLE]]

The ALCL to nonperforming LHFI decreased to 121.41% at December 31, 2024, compared to 321.66% at December 31, 2023, primarily driven by a $44.9 million increase in nonperforming LHFI at December 31, 2024. Past due loans to total LHFI increased to 0.56% at December 31, 2024, compared to 0.34% at December 31, 2023.

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Securities

Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue. We use the securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk and meet collateral as well as regulatory capital requirements. We manage the securities portfolio to optimize returns while maintaining an appropriate level of risk. Securities within the portfolio are classified as either held-to-maturity, available-for-sale or at fair value through income, based on the intent and objective of the investment and the ability to hold to maturity. Unrealized gains and losses arising in the available for sale portfolio as a result of changes in the fair value of the securities are reported on an after-tax basis as a component of accumulated other comprehensive (loss) income in stockholders’ equity while securities classified as held to maturity are carried at amortized cost. For further discussion of the valuation components and classification of investment securities, see Note 1 — Significant Accounting Policies to our consolidated financial statements contained in Part II, Item 8 of this report.

Our securities portfolio totaled $1.12 billion at December 31, 2024, representing a decrease of $151.9 million, or 11.9%, from $1.27 billion at December 31, 2023. The decrease was primarily due to sales, maturities and calls, as well as normal principal paydowns, which was partially offset by purchases and a decrease in unrealized losses during the year ended December 31, 2024. During the fourth quarter of 2024, we executed a bond portfolio optimization strategy aimed at enhancing long-term yields and improving overall portfolio performance. As a result, we replaced securities with a total book value of $188.2 million and a weighted average yield of 1.51% with new securities totaling $173.7 million with a weighted average yield of 5.22%, realizing a loss of $14.6 million. During the second half of 2023, we sold available for sale investment securities with total book value of $260.8 million and realized total loss of $11.8 million, the proceeds of which were used to pay down FHLB advances and support loan operations.

Our available for sale portfolio totaled $1.10 billion at December 31, 2024, which represented 98.4% of our total security portfolio and is comprised of 53.0% mortgage-backed, 23.2% municipal, 1.3% treasury/agency, 15.4% collateralized mortgage obligations and 7.1% corporate/asset-backed securities. Our available for sale portfolio totaled $1.25 billion at December 31, 2023, which represented 98.6% of our total security portfolio, and was comprised of 47.8% mortgage-backed, 22.5% municipal, 6.4% treasury/agency, 13.2% collateralized mortgage obligations and 10.1% corporate/asset-backed securities.

The securities portfolio had a weighted average effective duration of 4.46 years at December 31, 2024, compared to 4.28 years at December 31, 2023. For additional information regarding our securities portfolio, please see Note 3 — Securities to our consolidated financial statements contained in Part II, Item 8 of this report.

The following table sets forth the composition of our securities portfolio at the dates indicated.

[[GREPCENT_TABLE]]
[["","December 31,"],["(Dollars in thousands)","2024","","2023"],["Available for sale:","Carrying Amount","","% of Total","","Carrying Amount","","% of Total"],["State and municipal securities","$","255,976","","","23.2","%","","$","282,126","","","22.5","%"],["Corporate bonds","78,236","","","7.1","","","83,635","","","6.7"],["U.S. treasury and government agency securities","13,805","","","1.3","","","79,640","","","6.4"],["Commercial mortgage-backed securities","44,284","","","4.0","","","93,396","","","7.5"],["Residential mortgage-backed securities","540,834","","","49.0","","","506,502","","","40.3"],["Commercial collateralized mortgage obligations","28,566","","","2.6","","","35,183","","","2.8"],["Residential collateralized mortgage obligations","140,827","","","12.8","","","130,144","","","10.4"],["Asset-backed securities","\u2014","","","\u2014","","","43,005","","","3.4"],["Total","$","1,102,528","","","100.0","%","","$","1,253,631","","","100.0","%"],["Held to maturity:"],["State and municipal securities, net of allowance","$","11,095","","","","","$","11,615"],["Securities carried at fair value through income:"],["State and municipal securities","$","6,512","","","","","$","6,808"]]
[[/GREPCENT_TABLE]]

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The following table presents the fair value of securities available for sale and amortized cost of securities held to maturity and their corresponding yields at December 31, 2024. The securities are grouped by contractual maturity and use amortized cost for all yield calculations. Mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, which do not have contractual payments due at a single maturity date, are shown at the date the last underlying mortgage matures.

[[GREPCENT_TABLE]]
[["","December 31, 2024"],["(Dollars in thousands)","Within One Year","","After One Year but Within Five Years","","After Five Years but Within Ten Years","","After Ten Years","","Total"],["Available for sale:","Amount","","Yield","","Amount","","Yield","","Amount","","Yield","","Amount","","Yield","","Amount","","Yield"],["State and municipal securities (1)","$","2,189","","","2.67","%","","$","33,823","","","1.80","%","","$","107,550","","","2.31","%","","$","112,414","","","2.37","%","","$","255,976","","","2.27","%"],["Corporate bonds","\u2014","","","\u2014","","","7,617","","","7.62","","","70,195","","","4.71","","","424","","","4.50","","","78,236","","","4.99"],["U.S. treasury and government agency securities","299","","","3.00","","","78","","","7.60","","","10,148","","","5.15","","","3,280","","","1.53","","","13,805","","","4.26"],["Commercial mortgage-backed securities","\u2014","","","\u2014","","","26,646","","","1.44","","","17,638","","","2.18","","","\u2014","","","\u2014","","","44,284","","","1.73"],["Residential mortgage-backed securities","26","","","3.21","","","1,702","","","2.75","","","12,307","","","2.71","","","526,799","","","2.77","","","540,834","","","2.77"],["Commercial collateralized mortgage obligations","\u2014","","","\u2014","","","9,964","","","3.68","","","16,079","","","2.45","","","2,523","","","4.93","","","28,566","","","3.10"],["Residential collateralized mortgage obligations","\u2014","","","\u2014","","","\u2014","","","\u2014","","","8,534","","","2.85","","","132,293","","","2.66","","","140,827","","","2.67"],["Total securities available for sale","$","2,514","","","2.71","","","$","79,830","","","2.50","","","$","242,451","","","3.16","","","$","777,733","","","2.70","","","$","1,102,528","","","2.78"],["Held to maturity:"],["State and municipal securities (1)","\u2014","","","\u2014","","","5,153","","","6.35","","","5,992","","","2.50","","","\u2014","","","2.50","","","11,145","","","4.28"],["Securities carried at fair value through income:"],["State and municipal securities (1)","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","6,512","","","4.51","","","6,512","","","4.51"],["Total","$","2,514","","","2.71","","","$","84,983","","","2.73","","","$","248,443","","","3.14","","","$","784,245","","","2.72","","","$","1,120,185","","","2.80"]]
[[/GREPCENT_TABLE]]

____________________________

(1)Tax-exempt security yields are calculated without consideration of their tax benefit status.

The contractual maturity of mortgage-backed securities and collateralized mortgage obligations is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any time. Mortgage-backed securities and collateralized mortgage obligations are typically issued with stated principal amounts and are backed by pools of mortgage loans and other loans with varying maturities. The term of the underlying mortgages and loans may vary significantly due to the ability of a borrower to prepay outstanding amounts. Monthly pay downs on mortgage-backed securities tend to cause the average life of the securities to be much different from the stated contractual maturity. During a period of decreasing interest rates, fixed rate mortgage-backed securities tend to experience higher prepayments of principal, which can significantly shorten the estimated average life of these securities. As interest rates continue to fall, prepayments activity may increase further, thereby accelerating the reduction in the estimated average life of these securities.

All of our mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored entities. Other than securities issued by government agencies or government sponsored enterprises, we did not own securities of any one issuer for which aggregate cost exceeded 10.0% of our consolidated stockholders’ equity at December 31, 2024 or 2023. Additionally, we do not hold any Fannie Mae or Freddie Mac preferred stock, collateralized debt obligations, structured investment vehicles or second lien elements in the investment portfolio, nor does the investment portfolio contain any securities that are directly backed by subprime or Alt-A mortgages.

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Securities Carried at Fair Value through Income

At December 31, 2024 and 2023, we held one fixed rate community investment bond of $6.5 million and $6.8 million, respectively. We elected the fair value option on this security to offset corresponding changes in the fair value of related interest rate swap agreements.

Deposits

Deposits are the primary funding source used to fund our loans, investments and operating needs. We offer a variety of products designed to attract and retain both consumer and commercial deposit customers. These products consist of noninterest and interest-bearing checking accounts, savings deposits, money market accounts and time deposits. Deposits are primarily gathered from individuals, partnerships and corporations in our market areas. We also obtain deposits from local municipalities and state agencies.

Total deposits remained relatively flat at December 31, 2024, compared to December 31, 2023, with increases of $184.6 million, $157.9 million, and $40.1 million in interest-bearing demand, money market, and savings deposits, respectively, being offset by decreases of $364.8 million and $26.9 million in brokered and time deposits. Typically, higher market interest rates and sustained inflation will cause customers to move liquid asset balances into higher interest-earning vehicles such as money market funds.

The following table presents our deposit mix at the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31, 2024","","December 31, 2023"],["(Dollars in thousands)","Balance","","% of Total","","Balance","","% of Total","","$ Change","","% Change"],["Noninterest-bearing demand","$","1,900,651","","","23.1","%","","$","1,919,638","","","23.3","%","","$","(18,987)","","","(1.0)","%"],["Money market","2,930,710","","","35.6","","","2,772,807","","","33.6","","","157,903","","","5.7"],["Interest-bearing demand","2,060,463","","","25.1","","","1,875,864","","","22.7","","","184,599","","","9.8"],["Time deposits","941,000","","","11.4","","","967,901","","","11.7","","","(26,901)","","","(2.8)"],["Brokered deposits(1)","80,226","","","1.0","","","444,989","","","5.4","","","(364,763)","","","(82.0)"],["Savings","310,070","","","3.8","","","269,926","","","3.3","","","40,144","","","14.9"],["Total deposits","$","8,223,120","","","100.0","%","","$","8,251,125","","","100.0","%","","$","(28,005)","","","(0.3)"]]
[[/GREPCENT_TABLE]]
_____________________

(1)At December 31, 2024, brokered deposits included brokered time deposits and brokered interest-bearing demand of $79.99 million and $236,000, respectively. At December 31, 2023, brokered deposits included brokered time deposits of $445.0 million.

We manage our interest expense on deposits through specific deposit product pricing that is based on competitive pricing, economic conditions and current and anticipated funding needs. We may use interest rates as a mechanism to attract or deter additional deposits based on our anticipated funding needs and liquidity position. We also consider potential interest rate risk caused by extended maturities of time deposits when setting the interest rates in periods of future economic uncertainty.

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The following table reflects the classification of our average deposits and the average rate paid on each deposit category for the periods indicated:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","","2022"],["(Dollars in thousands)","Average Balance","","Interest Expense","","Average Rate Paid","","Average Balance","","Interest Expense","","Average Rate Paid","","","Average Balance","","Interest Expense","","Average Rate Paid"],["Interest-bearing demand","$","1,863,361","","","$","63,291","","","3.40","%","","$","1,788,423","","","$","50,033","","","2.80","%","","","$","1,545,581","","","$","11,007","","","0.71","%"],["Money market","2,942,691","","","119,533","","","4.06","","","2,646,447","","","91,685","","","3.46","","","","2,233,390","","","17,501","","","0.78"],["Time deposits","1,004,934","","","39,634","","","3.94","","","928,694","","","27,892","","","3.00","","","","611,195","","","4,476","","","0.73"],["Brokered deposits(1)","509,434","","","27,321","","","5.36","","","470,040","","","24,241","","","5.16","","","","5,002","","","8","","","0.16"],["Savings","289,525","","","5,094","","","1.76","","","291,059","","","2,606","","","0.90","","","","288,010","","","517","","","0.18"],["Total interest-bearing","6,609,945","","","254,873","","","3.86","","","6,124,663","","","196,457","","","3.21","","","","4,683,178","","","33,509","","","0.72"],["Noninterest-bearing demand","1,887,884","","","\u2014","","","","","2,147,019","","","\u2014","","","","","","2,422,132","","","\u2014"],["Total average deposits","$","8,497,829","","","$","254,873","","","3.00","","","$","8,271,682","","","$","196,457","","","2.38","","","","$","7,105,310","","","$","33,509","","","0.47"]]
[[/GREPCENT_TABLE]]
______________________

(1)Average brokered deposits include average brokered time deposits and average brokered interest-bearing demand of $440.0 million and $69.4 million, respectively, for the year ended December 31, 2024. Average brokered deposits included average brokered time deposits of $470.0 million and $5.0 million for the years ended December 31, 2023, and 2022, respectively.

Our average deposit balances were $8.50 billion for the year ended December 31, 2024, an increase of $226.1 million, or 2.7%, from $8.27 billion for the year ended December 31, 2023. The average rate paid on our interest-bearing deposits for the year ended December 31, 2024, was 3.86%, compared to 3.21% for the year ended December 31, 2023.

The increase in the average cost of our deposits was primarily the result of the rapidly rising interest rate environment experienced since March 2022, when the FRB started a series of eleven federal funds target range rate increases cumulating in a 525-basis point increase to a target range of 5.25% to 5.50%. More recently, in the third and fourth quarters of 2024, the FRB cut the federal funds target range rate three times by a total of 100 basis points from a 23-year high of 5.25% to 5.50% to 4.25% to 4.50%.

Average noninterest-bearing deposits during the year ended December 31, 2024, were $1.89 billion, compared to $2.15 billion at December 31, 2023, a decrease of $259.1 million, or 12.1%, and represented 22.2% and 26.0% of average total deposits for the year ended December 31, 2024 and 2023, respectively. Noninterest-bearing deposits have been impacted by the higher interest rate environment, as customers have been moving out of noninterest-bearing deposit balances into higher interest-earning investments, however, this trend has been slowing as rates begin to stabilize.

The following table presents the maturity distribution of our time deposits and the amount of such deposits in excess of the FDIC insurance limit at December 31, 2024. There were no otherwise uninsured time deposits below the FDIC insurance limit at December 31, 2024. The estimated total amount of uninsured deposits at December 31, 2024 and 2023, was $3.66 billion and $3.58 billion, respectively.

[[GREPCENT_TABLE]]
[["(Dollars in thousands)Remaining maturity:","U.S. Time Deposits in Excess of the FDIC Insurance Limit","","Total Time & Brokered Time Deposits"],["3 months or less","$","119,036","","","$","465,377"],["Over 3 through 6 months","96,933","","","333,832"],["Over 6 through 12 months","43,416","","","174,265"],["Over 12 months","5,460","","","47,516"],["Total","$","264,845","","","$","1,020,990"]]
[[/GREPCENT_TABLE]]

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Borrowings

Borrowed funds are summarized as follows:

[[GREPCENT_TABLE]]
[["","December 31,"],["(Dollars in thousands)","2024","","2023"],["Short-term FHLB advances","$","\u2014","","","$","70,000"],["Long-term FHLB advances","6,198","","","6,474"],["Overnight repurchase agreements with depositors","6,262","","","7,124"],["Total FHLB advances and other borrowings","$","12,460","","","$","83,598"],["Subordinated indebtedness, net","$","159,943","","","$","194,279"]]
[[/GREPCENT_TABLE]]

Short-term FHLB advances decreased $70.0 million, or 100.0%, at December 31, 2024, compared to December 31, 2023. Due to our increasing liquidity, we paid down our short-term advances during the year ended December 31, 2024.

Our long-term debt consists of advances from the FHLB with original maturities greater than one year and the subordinated indebtedness captioned and described below. Interest rates for FHLB long-term advances outstanding at December 31, 2024 and 2023, ranged from 1.99% to 4.57% and were subject to restrictions or penalties in the event of prepayment.

Overnight repurchase agreements with depositors consist of obligations of ours to depositors and mature on a daily basis. These obligations to depositors carried a daily average interest rate of 2.62% and 2.21% for the years ended December 31, 2024, and 2023, respectively.

At December 31, 2024, we held 37 unfunded letters of credit from the FHLB totaling $709.2 million with expiration dates ranging from January 2, 2025, to September 22, 2027. These letters of credit either support pledges for our public fund deposits or confirm letters of credit we have issued to support our customers’ businesses. Security for all indebtedness and outstanding commitments to the FHLB consists of a blanket floating lien on all of our first mortgage loans, commercial real estate and other real estate loans, as well as our investment in capital stock of the FHLB and deposit accounts at the FHLB. The net amounts available under our borrowing capacity from the FHLB at December 31, 2024 and 2023, were $2.15 billion and $2.01 billion, respectively.

Additionally, at December 31, 2024 and 2023, we had the ability to borrow $1.33 billion and $1.42 billion from the discount window at the Federal Reserve Bank of Dallas (“FRBD”), with $1.57 billion and $1.69 billion in commercial and industrial loans pledged as collateral, respectively. There were no borrowings against this line at both December 31, 2024 and 2023.

Holding Company Line of Credit

The Company had a line of credit with a maximum aggregate principal balance of $100 million, consisting of an initial $50.0 million extension of credit and any one or more potential incremental revolving loan amounts up to an aggregate principal of $50.0 million. Consistent with the terms of the agreement, the Company extended the maturity twice in prior years, and the Loan Agreement was terminated as of the October 27, 2024, expiration date. The Company had no balance outstanding on this revolving credit loan under the Loan Agreement at December 31, 2023.

Subordinated Indebtedness

At December 31, 2023, the Company had $34.7 million in subordinated promissory notes that were assumed in the merger with BTH (“BTH Notes”) with origination dates ranging from June 2015 to June 2021. After the five-year anniversary of issuance, the Company had the right to redeem the BTH Notes, in part or in full, at the Company’s discretion and, if applicable, subject to receipt of any required regulatory approvals. Primarily due to the declining Tier 2 capital contribution of the BTH Notes, the Company elected to redeem all but $1.1 million of the BTH Notes during the year ended December 31, 2024.

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In February 2020, Origin Bank completed an offering of $70.0 million in aggregate principal amount of 4.25% fixed-to-floating rate subordinated notes due 2030 (the “4.25% Notes”) to certain investors in a transaction exempt from registration under Section 3(a)(2) of the Securities Act of 1933, as amended. The 4.25% Notes bore interest at a fixed annual rate of 4.25%, payable semi-annually in arrears, to but excluding February 15, 2025. From and including February 15, 2025, to but excluding the maturity date or early redemption date, the interest rate would equal the three-month LIBOR rate plus 282 basis points, payable quarterly in arrears. On June 30, 2023, in conjunction with the customary fallback provision upon the discontinuation of LIBOR, the rate for the floating rate periods from and including February 15, 2025, on these notes transitioned to the three-month term SOFR plus 308 basis points. Origin Bank elected to redeem the 4.25% Notes on February 15, 2025, as permitted under the terms of the 4.25% Notes.

In October 2020, the Company completed of an offering of $80.0 million in aggregate principal amount of 4.50% fixed-to-floating rate subordinated notes due 2030 (the “4.50% Notes”). The 4.50% Notes bear a fixed interest rate of 4.50%, payable semi-annually in arrears, to but excluding November 1, 2025. From and including November 1, 2025, to but excluding the maturity date or earlier redemption date, the 4.50% Notes bear a floating interest rate expected to equal the three-month term Secured Overnight Financing Rate plus 432 basis points, payable quarterly in arrears. The Company may redeem the 4.50% Notes at any time upon certain specified events or in whole or in part on or after November 1, 2025. The 4.50% Notes qualify as Tier 2 capital for regulatory capital purposes for the Company and a portion of the proceeds was transferred to Origin Bank during the fourth quarter of 2020, which qualifies as Tier 1 capital for regulatory capital purposes for the Bank. During the years ended December 31, 2024 and 2023, and with the approval of the Board of Governors of the Federal Reserve System, the Company repurchased $1.0 million and $5.0 million, respectively, of the 4.50% notes.

For information regarding our junior subordinated debentures underlying the issuance of trust preferred securities, please see Note 11 — Borrowings in the notes to our consolidated financial statements contained in Part II, Item 8 of this report.

Liquidity and Capital Resources

Management oversees our liquidity position to ensure adequate cash and liquid assets are available to support our operations and satisfy current and future financial obligations, including demand for loan funding and deposit withdrawals. Management continually monitors, forecasts and tests our liquidity and non-core dependency ratios to ensure compliance with targets established by our Asset-Liability Management Committee and approved by our board of directors.

The Company, which is a separate legal entity apart from the Bank, must provide for its own liquidity, including the funding of the payment of any dividends that may be declared for our common stockholders and interest and principal on any outstanding debt or trust preferred securities incurred by the Company. The available cash balances as noted in the table below are available for the general corporate purposes described above, as well as providing capital support to the Bank.

Management measures our liquidity position by giving consideration to both on-balance sheet and off-balance sheet sources of and demands for funds on a daily and weekly basis. The table below shows the liquidity measures for the Company at the dates indicated:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","December 31, 2024","","December 31, 2023"],["Available cash balances at the holding company (unconsolidated)","$","47,876","","","$","87,698"],["Cash and liquid securities as a percentage of total assets","10.6","%","","10.9","%"]]
[[/GREPCENT_TABLE]]

There are regulatory restrictions on the ability of the Bank to pay dividends under federal and state laws, regulations and policies. See Item 1. Business - Regulation and Supervision above for more information.

Currently, we believe we have sufficient liquidity from our available on- and off-balance sheet liquidity sources, however, should market conditions change, we may take action to enhance our financial flexibility.

In addition to cash generated from operations, we utilize a number of funding sources to manage our liquidity, including core deposits, investment securities, cash and cash equivalents, loan repayments, federal funds lines of credit available from other financial institutions, as well as advances from the FHLB. We may also use the Federal Reserve discount window as a source of short-term funding.

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Core deposits, which are total deposits excluding time deposits greater than $250,000 and brokered deposits, are a major source of funds used to meet cash flow needs. Maintaining the ability to acquire these funds as needed in a variety of markets is the key to assuring our liquidity.

The investment portfolio is another source for meeting our liquidity needs. Monthly payments on mortgage-backed securities are used for short-term liquidity, and our investments are generally traded in active markets that offer a readily available source of cash through sales, if needed. Securities in our investment portfolio are also used to secure certain deposit types, such as deposits from state and local municipalities, and can be pledged as collateral for other borrowing sources.

Other sources available for meeting liquidity needs include long- and short-term advances from the FHLB, and federal funds lines of credit. Long-term funds obtained from the FHLB are primarily used as an alternative source to fund long-term growth of the balance sheet by supporting growth in loans and other long-term interest-earning assets. We typically rely on such funding when the cost of such borrowings compares favorably to the rates that we would be required to pay for other funding sources, including certain deposits. See Note 11 — Borrowings to our consolidated financial statements contained in Part II, Item 8 of this report for additional borrowing capacity and outstanding advances at the FHLB.

We also had unsecured federal funds lines of credit available to us, with no amounts outstanding at either December 31, 2024 or 2023. These lines of credit primarily provide short-term liquidity and in order to ensure availability of these funds, we test these lines of credit at least annually. Interest is charged at the prevailing market rate on federal funds purchased and FHLB advances.

Additionally, we had the ability to borrow at the Federal Reserve discount window using our commercial and industrial loans as collateral. There were no borrowings against this line at December 31, 2024.

In the normal course of business as a financial services provider, we enter into various financial instruments, such as certain contractual obligations and commitments to extend credit and letters of credit, to meet the financing needs of our customers. These commitments are discussed in more detail in Note 18 — Commitments and Contingencies to our consolidated financial statements contained in Part II, Item 8 of this report.

Stockholders’ Equity

Stockholders’ equity provides a source of permanent funding, allows for future growth and provides a degree of protection to withstand unforeseen adverse developments. Changes in stockholders’ equity is reflected below:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","Total Stockholders\u2019 Equity"],["Balance at January 1, 2024","$","1,062,905"],["Net income","76,492"],["Other comprehensive income, net of tax","14,994"],["Dividends declared - common stock ($0.60 per share)","(18,991)"],["Other","9,845"],["Balance at December 31, 2024","$","1,145,245"]]
[[/GREPCENT_TABLE]]

Stock Repurchases

In July 2022, the Board of Directors of the Company authorized a stock repurchase program pursuant to which the Company may, from time to time, purchase up to $50 million of its outstanding common stock. The shares may be repurchased in the open market or in privately negotiated transactions from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The stock repurchase program is intended to expire in three years but may be terminated or amended by the Board of Directors at any time. The stock repurchase program does not obligate the Company to purchase any shares at any time.

There were no stock repurchases during the year ended December 31, 2024 or 2023.

The Inflation Reduction Act of 2022 signed into law during in August 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax is effective beginning in 2023. There was no impact to our financial condition or result of operations as a result of this tax.

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Regulatory Capital Requirements

Together with the Bank, we are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements may result in certain actions by regulators that, if enforced, could have a direct material effect on our financial statements. At December 31, 2024 and 2023, we and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations of the Federal Reserve. As we deploy capital and continue to grow operations, regulatory capital levels may decrease depending on the level of earnings. However, we expect to monitor and control growth in order to remain “well capitalized” under applicable regulatory guidelines and in compliance with all applicable regulatory capital standards. While we are currently classified as “well capitalized,” an extended economic recession could adversely impact our reported and regulatory capital ratios.

The following table presents our regulatory capital ratios, as well as those of the Bank, at the dates indicated:

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","December 31, 2024","","December 31, 2023"],["Origin Bancorp, Inc.","Amount","","Ratio","","Amount","","Ratio"],["Common equity Tier 1 capital (to risk-weighted assets)","$","1,085,860","","","13.32","%","","$","1,012,916","","","11.83","%"],["Tier 1 capital (to risk-weighted assets)","1,101,766","","","13.52","","","1,028,729","","","12.01"],["Total capital (to risk-weighted assets)","1,339,735","","","16.44","","","1,286,604","","","15.02"],["Tier 1 capital (to average total consolidated assets)","1,101,766","","","11.08","","","1,028,729","","","10.50"],["Origin Bank"],["Common equity Tier 1 capital (to risk-weighted assets)","$","1,075,768","","","13.29","%","","$","1,019,732","","","11.95","%"],["Tier 1 capital (to risk-weighted assets)","1,075,768","","","13.29","","","1,019,732","","","11.95"],["Total capital (to risk-weighted assets)","1,239,644","","","15.31","","","1,188,000","","","13.92"],["Tier 1 capital (to average total consolidated assets)","1,075,768","","","10.89","","","1,019,732","","","10.45"]]
[[/GREPCENT_TABLE]]