Origin Bancorp, Inc. 10-K

Item 8. Financial Statements and Supplementary Data ORIGIN BANCORP, INC. Financial Statements DECEMBER 31, 2022, 2021 and 2020 INDEX Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 686 ) 75 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets 81 Consolidated Statements of Income 82 Consolidated Statements of Comprehensive Income 84 Consolidated Statements of Changes in Stockholders' Equity 85 Consolidated Statements of Cash Flows 86 Notes to Consolidated Financial Statements 88 76 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders, Board of Directors and Audit Committee Origin Bancorp, Inc. Ruston, Louisiana Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Origin Bancorp, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 22, 2023, expressed an unqualified opinion thereon . Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for Credit Losses The Company’s loan portfolio totaled $7.09 billion as of December 31, 2022, and the allowance for credit losses on loans was $87.2 million. The Company’s unfunded loan commitments totaled $2.7 billion, with an allowance for credit losses of $4.6 million. The Company’s available-for-sale and held-to-maturity securities portfolios totaled $1.7 billion as of December 31, 2022, and the allowance for credit losses on securities was $899,000. Together these amounts represent the allowance for credit losses (“ACL”). 77 Table of Contents Report of Independent Registered Public Accounting Firm As more fully described in Notes 1, 4, 5 and 19 to the Company’s consolidated financial statements, the Company estimates its exposure to expected credit losses as of the balance sheet date, for existing financial instruments held at amortized cost, securities classified as available for sale and off-balance sheet exposures, such as unfunded loan commitments, letters of credit and other financial guarantees that are not unconditionally cancellable by the Company. The determination of the ACL requires management to exercise significant judgment and consider numerous subjective factors, including determining qualitative factors utilized to adjust historical loss rates, loan credit risk grading and identifying loans requiring individual evaluation among others. As disclosed by management, different assumptions and conditions could result in a materially different amount for the estimate of the ACL. We identified the valuation of the ACL at December 31, 2022 as a critical audit matter. Auditing the valuation of the ACL involved a high degree of subjectivity in evaluating management's estimates, such as evaluating management's identification of credit quality indicators, grouping of loans determined to be similar into pools, estimating the remaining life of loans in a pool, assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with individually evaluated loans and assessing the appropriateness of loan credit risk grades. The primary procedures we performed as of December 31, 2022, to address this critical audit matter included: • Obtained an understanding of the Company’s process for establishing the ACL. • Tested the design and operating effectiveness of controls, including those related to technology, over the allowance for loan credit losses, including: ◦ loan data completeness and accuracy, ◦ reconciliation of loan balances accounted for at amortized cost to underlying detail, ◦ classifications of loans by loan pool, ◦ historical charge-off data, ◦ the calculation of loss rates given probability of default and loss given default, ◦ review of commercial real-estate appraisals, ◦ the calculation of estimated remaining lives of the loans, ◦ the establishment of qualitative adjustments, ◦ loan credit risk ratings, ◦ establishment of specific ACL on individually evaluated loans, ◦ and management’s review and disclosure controls over the ACL; • Tested of completeness and accuracy of the information utilized in the ACL, including evaluating the relevance and reliability of such information; • Tested the ACL model’s computational accuracy such as probability of default, loss given default and estimated remaining lives of loans; • Evaluated the qualitative adjustments to the ACL including assessing the basis for adjustments and the reasonableness of the significant assumptions; • Tested the loan review functions and evaluated the reasonableness of loan credit risk ratings; • Evaluated the reasonableness of specific allowances on individually evaluated loans; • Evaluated the overall reasonableness of assumptions used by management considering trends identified within peer groups; 78 Table of Contents Report of Independent Registered Public Accounting Firm • Evaluated the accuracy and completeness of Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326) , disclosures in the consolidated financial statements; • Evaluated credit quality trends in delinquencies, non-accruals, charge-offs and loan risk ratings; • Tested estimated utilization rate of unfunded loan commitments; • Evaluated documentation prepared to assess the methodology utilized by third party performing the ACL calculation for securities for reasonableness. Acquisition As described in Note 3 to the Company’s consolidated financial statements, the Company consummated the acquisition of BT Holdings, Inc. and its wholly-owned subsidiary, BTH Bank, on August 1, 2022, resulting in goodwill of approximately $94.5 million being recognized on the Company’s consolidated balance sheet. As part of the acquisition, management assessed that the acquisition qualified as a business combination and all identifiable assets and liabilities acquired were valued at fair value as part of the purchase price allocation as of the acquisition date. The identification and valuation of such acquired assets and assumed liabilities requires management to exercise significant judgment. Management utilized outside vendors to assist with estimating the fair value. We identified the consummated acquisition and the valuation of acquired assets and assumed liabilities as a critical audit matter. Auditing the acquired assets and assumed liabilities and other acquisition-related considerations involved a high degree of subjectivity in evaluating management’s fair value estimates and purchase price allocations, including the use of our internal valuation specialists. The primary procedures we performed to address this critical audit matter included: • Obtained and read the executed Agreement and Plan of Merger documents to gain an understanding of the underlying terms of the consummated acquisition; • Testing the design and operating effectiveness of controls including: ◦ Proper approval of the acquisition, ◦ Completeness and accuracy of opening balance sheet items, ◦ Accuracy of the loan level data, ◦ Accuracy of the valuations of significant assets acquired and liabilities assumed, ◦ Completeness and accuracy of the purchase price allocation, including tax impact, ◦ Completeness and accuracy of day 1 journal entries and general ledger mapping, ◦ Gap controls are in place from the acquisition date through the date of conversion, • Assessed management’s application of accounting guidance related to the business combination and management’s determination of whether the transaction was an acquisition of a business as defined within the ASC 805, Business Combinations , framework; • Assessed the completeness and accuracy of management’s purchase accounting model, including the balance sheet acquired and related fair value purchase price allocations made to identified assets acquired and liabilities assumed; • Obtained and evaluated significant outside vendor valuation estimates, and challenging management’s review of the appropriateness of the valuations including but not limited to, testing critical inputs, assumptions applied and valuation models utilized by the outside vendors; • Tested the completeness and accuracy of management’s calculation of total consideration paid; 79 Table of Contents Report of Independent Registered Public Accounting Firm • Tested the accuracy of the goodwill calculation resulting from the acquisition, which was the difference between the total consideration paid and the fair value of the net assets acquired; • Utilized internal valuation specialists to assist with testing the related fair value valuations and purchase price allocations made to identified assets acquired and liabilities assumed; • Read and evaluated the adequacy of the disclosures made in the notes to the Company’s consolidated financial statements. /s/ FORVIS, LLP (Formerly BKD, LLP) We have served as the Company’s auditor since 2016. Little Rock, Arkansas February 22, 2023 80 Table of Contents ORIGIN BANCORP, INC. Consolidated Balance Sheets (Dollars in thousands, except per share amounts) December 31, 2022 December 31, 2021 Assets Cash and due from banks $ 150,180 $ 133,334 Interest-bearing deposits in banks 208,792 572,284 Total cash and cash equivalents 358,972 705,618 Securities: Available for sale 1,641,484 1,504,728 Held to maturity, net allowance for credit losses of $ 899 and $ 167 at December 31, 2022 and 2021, respectively (fair value of $ 11,970 and $ 25,117 at December 31, 2022 and 2021, respectively) 11,275 22,767 Securities carried at fair value through income 6,368 7,497 Total securities 1,659,127 1,534,992 Non-marketable equity securities held in other financial institutions 67,378 45,192 Loans held for sale ($ 25,389 and $ 37,032 at fair value at December 31, 2022 and 2021, respectively) 49,957 80,387 Loans, net of allowance for credit losses of $ 87,161 and $ 64,586 at December 31, 2022 and 2021, respectively 7,002,861 5,166,745 Premises and equipment, net 100,201 80,691 Mortgage servicing rights 20,824 16,220 Cash surrender value of bank-owned life insurance 39,040 38,352 Goodwill 128,679 34,368 Other intangible assets, net 49,829 16,962 Accrued interest receivable and other assets 209,199 141,758 Total assets $ 9,686,067 $ 7,861,285 Liabilities and Stockholders' Equity Noninterest-bearing deposits $ 2,482,475 $ 2,163,507 Interest-bearing deposits 4,505,940 3,864,058 Time deposits 787,287 543,128 Total deposits 7,775,702 6,570,693 Federal Home Loan Bank ("FHLB") advances, repurchase obligations and other borrowings 639,230 309,801 Subordinated indebtedness, net 201,765 157,417 Accrued expenses and other liabilities 119,427 93,163 Total liabilities 8,736,124 7,131,074 Commitments and contingencies - See Note 19 - Commitments and Contingencies — — Stockholders' equity: Preferred stock, no par value, 2,000,000 shares authorized — — Common stock ($ 5.00 par value; 50,000,000 shares authorized; 30,746,600 and 23,746,502 shares issued at December 31, 2022 and 2021, respectively) 153,733 118,733 Additional paid‑in capital 520,669 242,114 Retained earnings 435,416 363,635 Accumulated other comprehensive (loss) income ( 159,875 ) 5,729 Total stockholders' equity 949,943 730,211 Total liabilities and stockholders' equity $ 9,686,067 $ 7,861,285 The accompanying notes are an integral part of these consolidated financial statements. 81 Table of Contents ORIGIN BANCORP, INC. Consolidated Statements of Income (Dollars in thousands, except per share amounts) Year Ended December 31, 2022 2021 2020 Interest and dividend income Interest and fees on loans $ 286,150 $ 218,781 $ 209,114 Investment securities-taxable 27,795 14,555 11,302 Investment securities-nontaxable 7,172 6,337 5,428 Interest and dividend income on assets held in other financial institutions 5,487 1,983 2,858 Total interest and dividend income 326,604 241,656 228,702 Interest expense Interest-bearing deposits 33,509 13,418 27,150 FHLB advances and other borrowings 9,411 4,654 5,895 Subordinated indebtedness 8,406 7,332 4,121 Total interest expense 51,326 25,404 37,166 Net interest income 275,278 216,252 191,536 Provision for credit losses 24,691 ( 10,765 ) 59,900 Net interest income after provision for credit losses 250,587 227,017 131,636 Noninterest income Service charges and fees 17,669 15,049 12,998 Insurance commission and fee income 22,869 13,098 12,746 Mortgage banking revenue 6,722 12,927 29,603 Other fee income 3,530 2,879 2,253 Gain on sales of securities, net 1,664 1,748 580 Loss on sales and disposals of other assets, net ( 175 ) ( 185 ) ( 1,213 ) Limited partnership investment (loss) income ( 199 ) 5,701 78 Swap fee income 457 814 2,546 Other income 4,737 10,162 5,061 Total noninterest income 57,274 62,193 64,652 The accompanying notes are an integral part of these consolidated financial statements. 82 Table of Contents ORIGIN BANCORP, INC. Consolidated Statements of Income - Continued (Dollars in thousands, except per share amounts) Year Ended December 31, 2022 2021 2020 Noninterest expense Salaries and employee benefits $ 118,971 $ 93,026 91,105 Occupancy and equipment, net 20,203 17,347 17,022 Data processing 10,456 9,117 8,321 Office and operations 8,120 6,399 5,624 Loan-related expenses 6,097 7,688 6,316 Professional services 3,813 3,644 3,975 Electronic banking 3,958 3,563 3,686 Advertising and marketing 4,431 3,438 3,710 Franchise tax expense 3,582 2,538 2,186 Regulatory assessments 3,547 2,904 3,826 Intangible asset amortization 5,488 844 1,060 Communications 1,246 1,574 1,767 Merger-related expense 6,171 — — Other expenses 4,336 4,697 3,337 Total noninterest expense 200,419 156,779 151,935 Income before income tax expense 107,442 132,431 44,353 Income tax expense 19,727 23,885 7,996 Net income $ 87,715 $ 108,546 $ 36,357 Basic earnings per common share $ 3.29 $ 4.63 $ 1.56 Diluted earnings per common share 3.28 4.60 1.55 The accompanying notes are an integral part of these consolidated financial statements. 83 Table of Contents ORIGIN BANCORP, INC. Consolidated Statements of Comprehensive (Loss) Income (Dollars in thousands) Year Ended December 31, 2022 2021 2020 Net income $ 87,715 $ 108,546 $ 36,357 Other comprehensive (loss) income Securities available for sale and transferred securities: Net unrealized holding (loss) gain arising during the period ( 209,097 ) ( 24,061 ) 25,646 Net losses realized as a yield adjustment in interest on investment securities ( 10 ) ( 10 ) ( 10 ) Reclassification adjustment for net gain included in net income ( 1,664 ) ( 1,748 ) ( 580 ) Change in the net unrealized (loss) gain on investment securities, before tax ( 210,771 ) ( 25,819 ) 25,056 Income tax (benefit) expense related to net unrealized (loss) gain arising during the period ( 44,262 ) ( 5,422 ) 5,262 Change in the net unrealized (loss) gain on investment securities, net of tax ( 166,509 ) ( 20,397 ) 19,794 Cash flow hedges: Net unrealized gain (loss) arising during the period 1,161 400 ( 739 ) Reclassification adjustment for gain (loss) included in net income 15 ( 204 ) ( 134 ) Change in the net unrealized gain (loss) on cash flow hedges, before tax 1,146 604 ( 605 ) Income tax expense (benefit) related to net unrealized gain (loss) on cash flow hedges 241 127 ( 127 ) Change in net unrealized position on cash flow hedges, net of tax 905 477 ( 478 ) Other comprehensive (loss) income, net of tax ( 165,604 ) ( 19,920 ) 19,316 Comprehensive (loss) income $ ( 77,889 ) $ 88,626 $ 55,673 The accompanying notes are an integral part of these consolidated financial statements. 84 Table of Contents ORIGIN BANCORP, INC. Consolidated Statements of Changes in Stockholders' Equity (Dollars in thousands, except per share amounts) Common Shares Outstanding Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (loss) Total Stockholders' Equity Balance at January 1, 2020 23,480,945 $ 117,405 $ 235,623 $ 239,901 $ 6,333 $ 599,262 Net income — — — 36,357 — 36,357 Other comprehensive income, net of tax — — — — 19,316 19,316 Impact of adoption of ASU 2016-13 - CECL — — — ( 760 ) — ( 760 ) Recognition of stock compensation, net 56,235 281 2,287 — — 2,568 Dividends declared - common stock ($ 0.3775 per share) — — — ( 8,870 ) — ( 8,870 ) Repurchase of common stock ( 30,868 ) ( 154 ) ( 569 ) — — ( 723 ) Balance at December 31, 2020 23,506,312 117,532 237,341 266,628 25,649 647,150 Net income — — — 108,546 — 108,546 Other comprehensive loss, net of tax — — — — ( 19,920 ) ( 19,920 ) Recognition of stock compensation, net 100,410 502 ( 730 ) — — ( 228 ) Stock Issuance - Lincoln Agency Acquisition 125,386 627 4,646 — — 5,273 Stock Issuance - Pulley-White Acquisition 51,962 260 1,925 — — 2,185 Dividends declared - common stock ($ 0.49 per share) — — — ( 11,539 ) — ( 11,539 ) Repurchase of common stock ( 37,568 ) ( 188 ) ( 1,068 ) — — ( 1,256 ) Balance at December 31, 2021 23,746,502 118,733 242,114 363,635 5,729 730,211 Net income — — — 87,715 — 87,715 Other comprehensive loss, net of tax — — — — ( 165,604 ) ( 165,604 ) Recognition of stock compensation, net 205,188 1,025 6,186 — — 7,211 Options assumed - BTH Merger — — 13,687 — — 13,687 Stock issuance - BTH Merger 6,794,910 33,975 258,682 — — 292,657 Dividends declared - common stock ($ 0.58 per share) — — — ( 15,934 ) — ( 15,934 ) Balance at December 31, 2022 30,746,600 $ 153,733 $ 520,669 $ 435,416 $ ( 159,875 ) $ 949,943 The accompanying notes are an integral part of these consolidated financial statements. 85 Table of Contents ORIGIN BANCORP, INC. Consolidated Statements of Cash Flows (Dollars in thousands) Year Ended December 31, Cash flows from operating activities: 2022 2021 2020 Net income $ 87,715 $ 108,546 $ 36,357 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 24,691 ( 10,765 ) 59,900 Depreciation and amortization 12,305 6,830 6,880 Net amortization on securities 8,734 7,758 4,581 Accretion of net premium/discount on purchased loans ( 2,840 ) — — Amortization of investments in tax credit funds 1,659 1,825 1,442 Gain on sale of securities, net ( 1,664 ) ( 1,748 ) ( 580 ) Deferred income tax expense (benefit) 18,309 6,279 ( 11,884 ) Stock-based compensation expense 3,449 2,295 2,320 Originations of mortgage loans held for sale ( 259,202 ) ( 478,325 ) ( 659,188 ) Proceeds from mortgage loans held for sale 264,607 542,638 570,349 Gain on mortgage loans held for sale, including origination of mortgage servicing rights ( 7,175 ) ( 17,015 ) ( 19,190 ) Mortgage servicing rights valuation adjustment ( 1,219 ) 2,593 12,746 Net (gain) loss on disposals of premises and equipment ( 19 ) 82 72 Increase in the cash surrender value of life insurance ( 688 ) ( 810 ) ( 917 ) Gain on equity securities without a readily determinable fair value — ( 19 ) — Net losses on sales and write-downs of other real estate owned 194 103 1,141 Gain on fair value of previously held interest in Lincoln Agency — ( 5,213 ) — Other operating activities, net ( 3,207 ) 6,432 ( 3,142 ) Net cash provided by operating activities 145,649 171,486 887 Cash flows from investing activities: Cash acquired in (paid for) business combination 69,953 ( 7,457 ) — Purchases of securities available for sale ( 558,091 ) ( 717,028 ) ( 700,319 ) Maturities and pay downs of securities available for sale 165,328 146,941 151,932 Proceeds from sales and calls of securities available for sale 487,544 44,893 64,702 Purchase of securities held to maturity ( 7,000 ) — ( 10,000 ) Maturities, pay downs and calls of securities held to maturity 17,750 15,250 415 Pay downs of securities carried at fair value 275 3,243 452 Net (purchases) sales of non-marketable equity securities held in other financial institutions ( 15,818 ) 17,583 ( 22,401 ) Originations of mortgage warehouse loans ( 9,126,356 ) ( 16,121,464 ) ( 13,665,295 ) Proceeds from pay-offs of mortgage warehouse loans 9,468,569 16,578,387 12,855,955 Net (increase) decrease in loans, excluding mortgage warehouse and loans held for sale ( 949,638 ) 55,020 ( 788,719 ) Proceeds from bank-owned life insurance — 11 — Return of capital and other distributions from limited partnership investments 6,668 — 818 Capital calls on limited partnership investments ( 4,057 ) ( 225 ) ( 525 ) Purchase of low-income housing tax credit investments ( 3,646 ) ( 1,254 ) — Purchases of premises and equipment ( 8,466 ) ( 5,015 ) ( 7,198 ) Proceeds from sales of premises and equipment — 18 — Proceeds from sales of other real estate owned 997 3,949 4,451 Net cash (used in) provided by investing activities ( 455,988 ) 12,852 ( 2,115,732 ) The accompanying notes are an integral part of these consolidated financial statements. 86 Table of Contents ORIGIN BANCORP, INC. Consolidated Statements of Cash Flows - Continued (Unaudited) (Dollars in thousands) Year Ended December 31, Cash flows from financing activities: 2022 2021 2020 Net (decrease) increase in deposits $ ( 361,450 ) $ 819,378 1,522,703 Repayments on long-term FHLB advances ( 250,257 ) ( 13,716 ) ( 1,898 ) Proceeds from Federal Reserve Bank Paycheck Protection Program Liquidity Facility ("PPPLF") — — 319,257 Repayments on PPPLF — — ( 319,257 ) Proceeds from short-term FHLB advances 10,025,000 5,726,000 2,107,000 Repayments on short-term FHLB advances ( 9,475,000 ) ( 6,376,000 ) ( 1,557,000 ) Issuance of subordinated debentures, net — — 147,374 Net increase in other short-term borrowings 30,000 — — Net increase (decrease) in securities sold under agreements to repurchase 8,339 1,039 ( 8,309 ) Dividends paid ( 15,887 ) ( 11,525 ) ( 8,854 ) Cash received from exercise of stock options 2,948 146 248 Common stock repurchased — ( 1,256 ) ( 723 ) Net cash (provided by) used in financing activities ( 36,307 ) 144,066 2,200,541 Net (decrease) increase in cash and cash equivalents ( 346,646 ) 328,404 85,696 Cash and cash equivalents at beginning of year 705,618 377,214 291,518 Cash and cash equivalents at end of year $ 358,972 $ 705,618 $ 377,214 Interest paid $ 50,104 $ 26,265 $ 36,432 Income taxes (refund) paid ( 6,261 ) 21,164 24,974 Significant non-cash transactions: Unsettled liability for investment purchases recorded at trade date 751 8,191 1,514 Real estate acquired in settlement of loans 675 3,889 2,446 (Decrease) increase in GNMA repurchase obligation ( 18,786 ) ( 12,130 ) 27,625 Recognition of operating right-of-use assets 13,428 5,776 1,338 Recognition of operating lease liabilities 13,643 6,310 1,621 Total assets acquired in BTH merger 1,846,598 — — Total liabilities assumed in BTH merger 1,633,340 — — Common stock issued in BTH merger as consideration 292,657 — — The accompanying notes are an integral part of these consolidated financial statements. 87 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 1 - Significant Accounting Policies Nature of Operations . Origin Bancorp, Inc. ("Company") is a financial holding company headquartered in Ruston, Louisiana. The Company's wholly-owned bank subsidiary, Origin Bank ("Bank"), was founded in 1912 in Choudrant, Louisiana. Deeply rooted in Origin’s 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 it serves. Origin provides a broad range of financial services and currently operates 59 banking centers located in Dallas/Fort Worth, East Texas, Houston, North Louisiana and Mississippi. The Company principally operates in one business segment, community banking. Basis of Presentation . The consolidated financial statements include the accounts of the Company and all other entities in which Origin Bancorp, Inc. has a controlling financial interest, including the Bank, and Davison Insurance Agency, LLC ("Davison Insurance"), doing business as Lincoln Agency, LLC (the "Lincoln Agency"), Lincoln Agency Transportation Insurance, Pulley-White Insurance Agency ("Pulley-White"), Reeves, Coon & Funderburg, Simoneaux & Wallace Agency and Thomas & Farr Agency. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's accounting and financial reporting policies conform, in all material respects, to accounting principles generally accepted in the United States ("U.S. GAAP") and to general practices within the financial services industry. The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued. Reclassifications . Certain amounts previously reported have been reclassified to conform to the current presentation. Such reclassifications had no effect on prior year net income or stockholders' equity. Variable Interest Entities . The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity ("VIE") under U.S. GAAP. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity's activities. The Company consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. As defined in applicable accounting standards, VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The Company's wholly-owned subsidiaries CTB Statutory Trust I, First Louisiana Statutory Trust I and BT Holdings Trust I are VIEs for which the Company is not the primary beneficiary. Accordingly, the accounts of these trusts are not included in the Company's consolidated financial statements. Operating Segments . Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Bank is the only significant subsidiary upon which management makes decisions regarding how to allocate resources and assess performance. Individual bank branches offer a group of similar services, including commercial, real estate and consumer loans, time deposits, checking and savings accounts, all with similar operating and economic characteristics. While the chief operating decision-maker monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the community banking services and branch locations are considered by management to be aggregated into one reportable operating segment, community banking. Use of Estimates . The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions based on available information that affect the amounts reported in the financial statements and disclosures provided, including the accompanying notes, and actual results could differ. Material estimates that are particularly susceptible to change include the allowance for credit losses for loans and available for sale securities; fair value measurements of assets and liabilities; and income taxes. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the Company's consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual results could differ from those estimates. 88 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Cash and Cash Equivalents . For purposes of the consolidated statements of cash flows, the Company considers all cash on hand, demand deposits with other banks, federal funds sold and short-term interest-bearing cash items with an original maturity less than 90 days to be cash equivalents. The Company maintains deposits with other financial institutions in amounts that exceed federal deposit insurance coverage. Furthermore, federal funds sold are essentially uncollateralized loans to other financial institutions. Management regularly evaluates the credit risk associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risks on cash and cash equivalents. At December 31, 2022 and 2021 the Company had cash collateral required to be held with counterparties on certain derivative transactions as discussed in Note 13 - Derivative Financial Instruments . Securities . The Company accounts for debt and equity securities as follows: Available for Sale ("AFS") - Debt securities that will be held for indefinite periods of time, including securities that may be sold in response to changes in market interest or prepayment rates, needs for liquidity and changes in the availability of and the yield of alternative investments are classified as AFS. These assets are carried at fair value. Fair value is determined using published quotes. If quoted market prices are not available, fair values are based on other methods including, but not limited to the discounting of cash flows. Unrealized gains and losses on AFS securities are excluded from earnings and reported net of tax in accumulated other comprehensive (loss) income until realized. Please see the paragraphs under Allowance for Credit Losses referenced below in this footnote for information on the allowance for credit losses pertaining to AFS securities. Held to Maturity ("HTM") - Debt securities that management has the positive intent and ability to hold until maturity are classified as HTM and are carried at their remaining unpaid principal balance, net of unamortized premiums or unaccredited discounts. Please see the paragraphs under Allowance for Credit Losses referenced below in this footnote for information on the allowance for credit losses pertaining to HTM securities. Securities Carried at Fair Value through Income - Debt securities for which the Company has elected the fair value option for accounting are classified as securities carried at fair value through income. Management has elected the fair value option for these items to offset the corresponding change in fair value of related interest rate swap agreements. Fair value is determined using discounted cash flows and credit quality indicators. Changes in fair value are reported through the consolidated statements of income as a part of other noninterest income. Interest income on securities includes amortization of purchase premiums and discounts. Premiums and discounts on securities are generally amortized using the interest method with a constant effective yield without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Premiums on callable securities are amortized to their earliest call date. A security is placed on nonaccrual status if (i) principal or interest has been in default for a period of 90 days or more or (ii) full payment of principal and interest is not expected. The Company has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest in other assets in the consolidated balance sheets. Interest accrued but not received for a security placed on nonaccrual status is reversed against interest income. Gains and losses on sales are recorded on the trade date, are derived from the amortized cost of the security sold and are determined using the specific identification method. Non-marketable Equity Securities Held in Other Financial Institutions . Securities with limited marketability, such as stock in the Federal Reserve Bank of Dallas ("FRB") or the Federal Home Loan Bank of Dallas ("FHLB"), are carried at cost, less impairment, if any. These investments in stock do not have readily determinable fair values. The Company's remaining equity investments in other financial institutions, excluding FRB and FHLB, totaling $ 15.8 million and $ 15.7 million at December 31, 2022 and 2021, respectively, qualify for the practicability exception under Accounting Standards Update ("ASU") 2016-01 due to having illiquid markets and are carried at cost, less impairment, plus or minus any observable price changes. The carrying value of these securities was evaluated and was determined not to be impaired during the years ended December 31, 2022 and 2021 . Loans Held for Sale . Loans held for sale include mortgage loans and are carried at fair value, with unrealized gains and losses recorded in the consolidated statements of income. Please see Mortgage Servicing Rights and Transfers of Financial Assets below for information on the GNMA repurchase asset which represents the difference between the total loans held for sale on the face of the consolidated balance sheet and the loans held for sale at fair value also shown on the face of the consolidated balance sheet. 89 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Forward commitments to sell mortgage loans are acquired to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are mandatory forward commitments, and the Company is required to substitute another loan or to buy back the commitment if the original loan does not fund. Typically, the Company delivers the mortgage loans within a few days after the loans are funded. These commitments are derivative instruments carried at fair value. Gains and losses resulting from sales of mortgage loans are realized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price (including the fair value of any items such as mortgage servicing rights) and the carrying amount of the loans sold. Fees received from borrowers to guarantee the funding of mortgage loans held for sale are recognized as income or expense when the loans are sold or when it becomes evident that the commitment will not be used. Acquisition Accounting and Acquired Loans. The Company accounts for its mergers/acquisitions under Financial Accounting Standards Board ("FASB") 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. In accordance with ASC 326, the Company records 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 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) non-accrual status; (2) troubled debt restructured designation; (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 been previously delinquent two times 60 days. An allowance for credit losses is determined using the same methodology as other individually evaluated loans. The Non-PCD model utilizes data from the Bank in order to determine the probability of default and loss given default to be used in the calculation. The initial allowance for credit losses, determined on a collective basis, is allocated to individual 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 allowance for credit losses are recorded through the provision for credit losses. Loans . Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for credit losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, and certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method. Late fees are recognized as income when earned, assuming collectability is reasonably assured. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and classifies these overdrafts as loans in its consolidated balance sheets. 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. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Past due status is based on 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 generally returned to accrual status when contractual payments are less than 90 days past due, the customer has made required payments for at least six months, and the Company reasonably expects to collect all principal and interest. 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 allowance for loan credit losses. 90 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Allowance for Credit Losses . The allowance for loan credit losses represents the estimated losses for financial assets 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. The Company evaluates loans held for investment ("LHFI") on a pool basis with pools of loans characterized by loan type, collateral, industry, internal credit risk rating and Fair Isaac Corporation ("FICO") score. 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 differences between current period conditions, including the economic forecast and the conditions existing during the historical loss period. Historical losses are additionally adjusted for the effects of certain economic variables forecast over a one-year 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. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Loans are charged off against the allowance for credit losses when management believes the loss is confirmed. Subsequent recoveries, if any, are credited to the allowance. Delinquency statistics are updated at least monthly and are the most meaningful indicator of the credit quality of one-to-four single-family residential, home equity loans and lines of credit and other consumer loans. Internal risk ratings are considered the most meaningful indicator of credit quality for commercial and industrial, construction, and commercial real estate loans. Internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management's estimates of loss factors used in determining the amount of the allowance for credit losses. Internal risk ratings are updated on a regular basis. Troubled debt restructurings ("TDRs") are loans for which the contractual terms on the loan have been modified and both of the following conditions exist: (1) the borrower is experiencing financial difficulty and (2) the restructuring constitutes a concession. Concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The Company assesses all loan modifications to determine whether they constitute a TDR. The allowance for off-balance sheet exposures was determined using the same methodology that is applied to LHFI. Utilization rates are determined based on historical usage. Credit losses related to available for sale debt securities are recorded through an allowance for credit losses. The amount of the allowance for credit losses is limited to the amount by which fair value is below amortized cost. Discounted cash flow analysis is required for determining credit losses for available for sale securities. In determining whether or not a credit loss exists, such factors as extent of the loss, adverse conditions related to the entity, industry or geographic region, security structure, ratings and changes by a rating agency and past performance are considered. The length of time a security has been in an unrealized loss position is not a factor in determining whether a credit loss exists. The allowance for credit losses for held-to-maturity securities is calculated using a probability of default, loss given default methodology. Credit losses are estimated over the lives of the securities using historical loss rates, adjusted for current conditions and reasonable and supportable forecasts. Third-party data is used for the historical loss rates and probability of default statistics. The forecast effect is applied over the estimated lives of the securities. Premises and Equipment, net . Land is carried at cost. Buildings and improvements are stated at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives of the assets, which range from 35 to 39 years. Furniture, fixtures, and equipment are stated at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives of the assets, which range from three to seven years . Leases. The Company determines if an arrangement is a lease at inception. Operating lease assets are included in accrued interest receivable and other assets, operating lease liabilities are included in accrued expenses and other liabilities in the Company's consolidated balance sheets. The Company has made an accounting policy election not to recognize short-term lease assets and liabilities (less than a 12-month term) or immaterial equipment and server space leases in its consolidated balance sheets; instead, the Company recognizes the lease expense for these leases on a straight-line basis over the life of the lease. The Company has no material finance leases. 91 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Right of use ("ROU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses an estimated incremental collateralized borrowing rate, which is derived from information available at the lease commencement date and gives consideration to the applicable FHLB borrowing rates, when determining the present value of lease payments. The Company's lease terms include options to extend a lease when it is reasonably certain that the Company will exercise that option. The Company's lease agreements do not contain any residual value guarantees. All of the Company's operating long-term leases are real estate leases, which are accounted for as a single lease component. Mortgage Servicing Rights and Transfers of Financial Assets . Gains or losses on "servicing-retained" loan sale transactions generally include a component reflecting the differential between the contractual interest rate of the loan and the interest rate to be received by the investor. The present value of the estimated future profit for servicing the loans is also taken into account in determining the amount of gain or loss on the sale of these loans. For loans sold servicing-retained, the fair value of mortgage servicing rights is recorded as an asset, with their value estimated using a discounted cash flow methodology to arrive at the present value of future expected earnings from the servicing of the loans. Significant model inputs include prepayment speeds, discount rates, and servicing costs. Servicing revenues are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. Loans sold into the secondary market are considered transfers of financial assets. These transfers are accounted for as sales when control over the asset has been surrendered, which is deemed to have occurred when: an asset does not have any claims to it by the transferor or their creditors, including in bankruptcy or other receivership situations; the transferee obtains the unconditional right to pledge or exchange the asset; or the transfer does not include a repurchase provision above the limited recourse provisions of these loan sales. GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer's option and without GNMA's prior authorization, the servicer may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When a financial institution is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be included in the consolidated balance sheets as mortgage loans held for sale, regardless of whether the institution intends to exercise the buy-back option. These loans were recorded as mortgage loans held for sale, at the lower of cost or fair value with a corresponding liability in FHLB advances and other borrowings on the Company's consolidated balance sheets. During the quarter ended December 31, 2022, the Company entered into a contract to sell substantially all of its GNMA mortgage servicing rights portfolio, recognized an impairment of $ 2.0 million, and met all final sale conditions in early 2023. The sale was completed in February 2023. The Company sold approximately $ 1.8 million in GNMA mortgage servicing rights, representing $ 453.3 million in unpaid principal balances, with no significant additional gain or loss realized, and derecognized the related GNMA repurchase asset and offsetting liability of $ 24.6 million. Derivative Instruments and Hedging Activities . All derivatives are recorded on the accompanying consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. During the term of a cash flow hedge contract, the effective portion of changes in fair value in the derivative instrument are recorded in accumulated other comprehensive (loss) income. Changes in the fair value of derivatives to which hedge accounting does not apply are recognized immediately in earnings. Note 13 - Derivative Financial Instruments describes the derivative instruments currently used by the Company and discloses how these derivatives impact its consolidated balance sheets and statements of income. 92 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Goodwill and Other Intangible Assets . Goodwill, which represents the excess of cost over the fair value of the net assets of an acquired business, is not amortized but evaluated for potential impairment on an annual basis, which is typically October 1 for the Company, or more often if events or circumstances indicate that there may be impairment. Other intangible assets, such as core deposit intangibles and relationship based intangibles, are amortized on a basis consistent with the receipt of economic benefit to the Company. Such assets are evaluated at least annually as to the recoverability of their carrying value for potential impairment. In the quarter following the period in which identified intangible assets become fully amortized, the fully amortized balances are removed from the gross asset and accumulated amortization amounts. Other Real Estate Owned . Other real estate owned ("OREO") represents properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure on loans on which the borrowers have defaulted as to payment of principal and interest. OREO also includes bank-owned real estate which the Company is no longer utilizing and intends to sell. These properties are initially recorded at fair value, less cost to sell, at the date of foreclosure, establishing a new cost basis. Fair value is determined based on third-party appraisals. Any subsequent capital improvements that increase value are added to the balance of the properties. Any valuation adjustments required at the date of transfer from loans to OREO are charged to the allowance for credit losses. Any subsequent write-downs to reflect current fair value, or gains and losses on the sale of the properties are charged to noninterest income. At December 31, 2022 and 2021, the balance of OREO was $ 806,000 and $ 1.5 million, respectively, and included as a component of accrued interest receivable and other assets in the accompanying consolidated balance sheets. Overnight Repurchase Agreements with Depositors . The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates it to repurchase the assets. Securities sold under agreements to repurchase generally mature on the banking day following that on which the investment was initially sold and are treated as collateralized financing transactions which are recorded at the amounts at which the securities were sold plus accrued interest. Interest rates and maturity dates of the securities involved vary and are not intended to be matched with funds from customers. Revenue Recognition . In general, for revenue not associated with financial instruments, guarantees and lease contracts, the Company applies the following steps when recognizing revenue from contracts with customers: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when a performance obligation is satisfied. Our contracts with customers are generally short-term in nature, typically due within one year or less or cancellable by us or our customer upon a short notice period. Performance obligations for our customer contracts are generally satisfied at a single point in time, typically when the transaction is complete, or over time. Descriptions of the Company's revenue generating activities that are within the scope of the revenue recognition standard are described below. Service charges and fees on deposit accounts Service charges and fees on deposit accounts are primarily comprised of maintenance fees, service fees, stop payment and insufficient funds fees. The Company's performance obligation for service fees or other fees covering a period of time are generally satisfied, and related revenue recognized, over the period in which the service is provided. The Company's performance obligations for transactional-based fees are generally satisfied, and related revenue recognized, at a point in time. Insurance commission and fee income The Company earns commission income through production on behalf of insurance carriers and also earns fee income by providing complementary services such as collection of premiums. In most instances, the Company considers the performance obligation to be complete at the time the service was rendered. Credit card interchange income The Company records credit card interchange income at a point in time as card transactions occur. The Company's performance obligation for these transactions is deemed to have occurred upon completion of each transaction. The amounts are included as a component of other income in the consolidated statements of income. 93 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Gain or loss on sale of other assets and OREO In the normal course of business, the Company recognizes the sale on other assets and OREO, along with any gain or loss, when control of the property transfers to the buyer through an executed contractual agreement. The transaction price is fixed, and on occasion the Company will finance a portion of the purchase price of the transferred asset. Mortgage Banking Revenue . This revenue category primarily reflects the Company's mortgage production, sales and mortgage servicing revenue, including fees and income derived from mortgages originated with the intent to sell; mortgage sales and servicing; and the impact of risk management activities associated with the mortgage pipeline and mortgage servicing rights ("MSRs"). This revenue category also includes gains and losses on sales and changes in fair value for mortgage loans originated with the intent to sell and measured at fair value under the fair value option. Changes in the fair value of MSRs are reported in mortgage banking revenue. Net interest income from mortgage loans is recorded in interest income. Income Taxes . Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company did not have any amount accrued with respect to uncertain income tax positions at December 31, 2022 and 2021. The Company recognizes interest and/or penalties related to income tax matters as a component of noninterest expense. There were no penalties or related interest for the years ended December 31, 2022, 2021 or 2020. Federal income tax expense or benefit has been allocated to subsidiaries on a separate return basis. Stock-Based Compensation . The cost of employee services received in exchange for stock options, restricted stock and performance stock grants and/or units are measured using the fair value of the award on the grant date and is recognized over the service period. Other Investments . The Company accounts for investments in limited partnerships, limited liability companies ("LLCs"), and other privately held companies using either the equity method of accounting or at amortized cost net of impairments and observable price changes. The accounting treatment depends upon the Company's percentage ownership or degree of management influence. Under the equity method of accounting, the Company records its initial investment at cost. Subsequently, the carrying amount of the investment is increased or decreased to reflect its share of income or loss of the investee. The Company's recognition of earnings or losses from an equity method investment is based on its ownership percentage in the investee and the investee's earnings for the reporting period, and is recorded on a one-quarter lag. All of the Company's investments in limited partnerships, LLCs, and other companies are privately held, and their fair values are not readily available. Management evaluates the investments in investees for impairment based on the investee's ability to generate cash through its operations or obtain alternative financing, and other subjective factors. There are inherent risks associated with investments in such companies, which may result in volatility in the consolidated statements of income in future periods. At December 31, 2022 and 2021, investments in limited partnerships, LLCs and other privately held companies totaled $ 20.9 million and $ 21.4 million, respectively, and were included in accrued interest receivable and other assets in the accompanying consolidated balance sheets. 94 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Investments in Tax Credit Entities . As part of its Community Reinvestment Act responsibilities and due to their favorable economic characteristics, the Company invests in tax credit-motivated projects primarily in the markets it serves. These projects are directed at tax credits issued under Low-Income Housing Tax Credits. The Company generates returns on tax credit motivated projects through the receipt of federal, and if applicable, state tax credits. The federal tax credits are recorded as an offset to the income tax provision in the year that they are earned under federal income tax law – over 10 to 15 years beginning in the year in which rental activity commences. These credits, if not used in the tax return for the year of origination, can be carried forward for 20 years. The Company invests in a tax credit entity, usually an LLC, which owns the real estate. The Company receives a nonvoting interest in the entity that must be retained during the compliance period for the credits (15 years for Low-Income Housing Tax Credit programs). Control of the tax credit entity rests in the 0.1 % interest general partner, who has the power and authority to make decisions that impact economic performance of the project and is required to oversee and manage the project. Due to the lack of any voting, economic, or managerial control, and due to the contractual reduction in the investment, the Company accounts for its investment by amortizing the investment, beginning at the issuance of the certificate of occupancy of the project, over the compliance period, as management believes any potential residual value in the real estate will have limited value. Amortization is included as a component of income tax expense. The Company has the risk of credit recapture if the project does not maintain compliance during the compliance period. No such events have occurred to date. At December 31, 2022 and 2021, the Company had investments in tax credit entities of $ 9.4 million and $ 11.1 million, respectively, which are included in accrued interest receivable and other assets in the accompanying consolidated balance sheets. Earnings Per Share . Basic and diluted earnings per common share are calculated using the treasury method, under which basic earnings per share is calculated as net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options and restricted stock awards. Diluted income per common share considers common stock issuable under the assumed release of unvested restricted stock awards, restricted stock units, performance stock units, shares potentially issuable under the employee stock purchase plan, and the assumed exercise of stock options granted. The dilutive effect of share-based payment awards that are not deemed to be participating securities is calculated using the treasury stock method, which assumes that the proceeds from exercise are used to purchase common stock at the average market price for the period. Potentially dilutive common stock equivalents are excluded from the computation of diluted earnings per common share in periods in which the effect would be anti-dilutive. Effect of Recently Adopted Accounting Standards ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes. It also clarifies certain aspects of the existing guidance to promote more consistent application, among other things. The amendments in the update became effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and did not have a significant impact on the Company's consolidated financial statements or disclosures. ASU No. 2021-06, Presentation of Financial Statements (Topic 205), Financial Services —Depository and Lending(Topic 942), and Financial Services — Investment Companies (Topic 946) —Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants amends the Accounting Standards Codification in order to agree the Codification to the new SEC releases 33-10786 and 33-10835 (the "Releases"). The Releases clearly define whether an acquired or disposed business subsidiary is significant; update, expand and eliminate certain disclosures; eliminate overlap with certain SEC and U.S.GAAP rules; and add a new subpart of Regulation S-K. The ASU is effective upon issuance, however, the SEC release on which the ASU is based is effective for registrants with the first fiscal year ending after December 15, 2021, while Guide 3 will be rescinded effective January 1, 2023. Implementation of this ASU did not materially impact the Company's financial statement disclosures. 95 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Effect of Newly Issued But Not Yet Effective Accounting Standards ASU No. 2021-08, Business Combinations (Topic 805) — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update affect accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Implementation of this ASU is not expected to materially impact the Company's financial statements or disclosures. ASU No. 2022-01, Derivatives and Hedging (Topic 815) — Fair Value Hedging - Portfolio Layer Method. The amendments in this Update clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers. Additionally, this Update allows entities to elect to apply the portfolio layer method of hedge accounting in accordance with Topic 815. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Implementation of this ASU is not expected to materially impact the Company's financial statements or disclosures. ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326) — Troubled Debt Restructurings and Vintage Disclosures. The amendments in this Update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. For public business entities, the amendments in this Update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Implementation of this ASU is not expected to materially impact the Company's financial statements or disclosures. ASU No. 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848 — The amendments in this Update provide temporary relief during the transition period in complying with Update No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The Board included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published. At the time that Update 2020-04 was issued, the UK Financial Conduct Authority (FCA) had established its intent that it would no longer be necessary to persuade, or compel, banks to submit to LIBOR after December 31, 2021. As a result, the sunset provision was set for December 31, 2022 - 12 months after the expected cessation date of all currencies and tenors of LIBOR. In March 2021, the FCA announced that the intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848. Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, the amendments in this Update defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The ASU is effective immediately. Implementation of this ASU is not expected to materially impact the Company's financial statements or disclosures. 96 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 2 - Earnings Per Share Basic and diluted earnings per common share are calculated using the treasury method. Under the treasury method, basic earnings per share is calculated as net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under the Company's stock and incentive compensation plans. Information regarding the Company's basic and diluted earnings per common share is presented in the following table: (Dollars in thousands, except per share amounts) Years Ended December 31, Numerator: 2022 2021 2020 Net income $ 87,715 $ 108,546 $ 36,357 Denominator: Weighted average common shares outstanding 26,627,476 23,431,504 23,367,221 Dilutive effect of stock-based awards 133,116 177,082 144,731 Weighted average diluted common shares outstanding 26,760,592 23,608,586 23,511,952 Basic earnings per common share $ 3.29 $ 4.63 $ 1.56 Diluted earnings per common share 3.28 4.60 1.55 Note 3 - Business Combinations BT Holdings, Inc. On August 1, 2022, the Company completed its merger with BT Holdings, Inc. (“BTH”), a Texas corporation and the registered bank holding company of BTH Bank, acquiring 100 % of the voting equity interests of BTH. The Company issued 6,794,910 shares of its common stock, and all outstanding BTH common stock options were converted into options to purchase an aggregate of 611,676 shares of Origin common stock. Based on the closing price of the Company's common stock on July 29, 2022, of $ 43.07 per share, the aggregate consideration to be paid to holders of BTH common stock in connection with the merger is valued at approximately $ 307.8 million. Goodwill of $ 94.5 million was recorded as a result of the transaction. The merger added new markets for expansion and brings complementary businesses together to drive synergies and growth, which are the factors that gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes. Including the effects of the known purchase accounting adjustments, as of the merger date, Origin had approximately $ 9.84 billion in assets, $ 6.77 billion in loans and $ 7.99 billion in deposits on a consolidated basis. Origin Bank and BTH Bank, N.A. operated as separate banking subsidiaries of the Company until the merger of the banks, which Origin completed on October 7, 2022, concurrently with the data processing conversion. BTH formerly operated its banking business from 13 locations in East Texas, Dallas and Fort Worth, Texas, each of which now operates as a banking location of Origin Bank. The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies. The Company has determined that the merger of the net assets of BTH constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. 97 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The following schedule is a preliminary breakdown of the assets acquired and liabilities assumed as of the merger date: BT Holdings, Inc. (Dollars in thousands) As Recorded by Origin Assets Acquired: Cash and cash equivalents $ 69,953 Investment securities 456,808 Loans acquired 1,239,532 Allowance for credit losses on loans ( 5,527 ) Loans receivable, net 1,234,005 Premises and equipment 17,825 Non-marketable equity securities held in other financial institutions 5,873 Core deposit intangible 38,356 Other assets 23,778 Total assets acquired $ 1,846,598 Liabilities Assumed: Noninterest-bearing deposits $ 398,089 Interest-bearing deposits 865,864 Time deposits 302,506 Total deposits 1,566,459 Securities sold under agreements to repurchase 10,133 Subordinated indebtedness, net 44,074 Accrued expenses and other liabilities 12,674 Total liabilities assumed 1,633,340 Net assets acquired 213,258 Purchase price 307,784 Goodwill $ 94,526 The Company’s operating results include the operating results of the acquired assets and assumed liabilities of BTH subsequent to the merger date. Acquisition Accounting. The following is a description of the methods used to determine the fair values of significant assets and liabilities acquired as part of a merger or acquisition. The Company elected to use the pushdown accounting method to record the merger. Loans acquired – Fair values for PCD loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates except when a fair value of collateral approach was applied. The discount rates used for PCD loans were based on current market rates and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses, as that has been included in the estimated cash flows. Non-PCD loans were grouped together according to similar characteristics and were treated in the aggregate when applying valuation techniques. See Note 5 - Loans in these notes to the consolidated financial statements for more information related to loans acquired. 98 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Loan Acquisition Accounting – The Company accounts for its acquisitions/mergers under 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 are PCD loans. 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. The Company then records the necessary allowance for credit losses on the non-PCD loans through provision for credit losses expense. During the quarter ended December 31, 2022, the Company continued to analyze the valuations and accounting associated with the acquired assets and assumed liabilities and received updated information resulting in the revised amounts displayed below. The Company updated the estimated amounts of these items within the consolidated balance sheets with a corresponding adjustment to goodwill. The changes are gross of taxes and reflected in the following table: (Dollars in thousands) Acquired Asset or Liability Consolidated Balance Sheet Line Item Provisional Estimate Revised Estimate Increase (Decrease) Loan acquired Loans, net of allowance for credit losses $ 1,239,625 $ 1,239,532 $ ( 93 ) Deferred tax asset Other Assets 17,427 23,778 6,351 Provision for off-balance sheet contingencies Accrued expenses and other liabilities 14,530 12,674 ( 1,856 ) Goodwill Goodwill 102,640 94,526 ( 8,114 ) Purchased loans that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit loss on the date of the merger using the same methodology as other loans held for investment as discussed in Note 5 - Loans in these notes to the consolidated financial statements. The following table provides a summary of loans purchased with credit deterioration at the merger transaction date with BTH: August 1, 2022 (Dollars in thousands) Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total Unpaid principal balance $ 10,731 $ 1,315 $ 2,880 $ 37,117 $ — $ 169 $ 52,212 PCD allowance for credit loss at merger 1 — — 5,525 — 1 5,527 Non-credit related (premium)/discount ( 277 ) ( 92 ) 3 ( 77 ) — 1 ( 442 ) Fair value of PCD loans $ 11,007 $ 1,407 $ 2,877 $ 31,669 $ — $ 167 $ 47,127 99 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Revenue and earnings of BTH since the acquisition date have not been disclosed as the acquired company was merged into the Company and separate financial information is not readily available. The following table presents unaudited pro-forma information as if the merger with BTH had occurred on January 1, 2021. This pro-forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit intangible and related income tax effects and is based on our historical results for the periods presented. Transaction-related costs related to the merger are not reflected in the pro-forma amounts. The pro-forma information does not necessarily reflect the results of operations that would have occurred had the Company acquired BTH at the beginning of fiscal year 2021. Cost savings are also not reflected in the unaudited pro-forma amounts. (Dollars in thousands except share and per share data) Actual for the Year Ended December 31, 2022 Pro-Forma for the Year Ended December 31, 2022 2021 Net interest income $ 275,278 $ 323,772 $ 276,817 Noninterest income 57,274 65,900 66,157 Net income 87,715 104,969 122,710 Pro-forma earnings per share: Basic — 3.14 4.06 Diluted — 3.11 4.02 Weighted average shares outstanding: 26,627,476 33,455,866 30,259,894 Basic $ 3.29 $ — $ — Diluted 3.28 — — Lincoln Agency and Pulley-White Acquisition On December 31, 2021, the Company acquired the remaining 62 % equity interest in the Lincoln Agency for $ 5.3 million in cash and $ 5.3 million in Company common stock. The Company previously acquired a 38 % minority interest in Lincoln Agency that was accounted for as an equity method investment, which had an immaterial carrying value at the acquisition date. The acquisition of the remaining equity interest was considered a step acquisition, whereby the Company re-measured the previously held equity method investment to its fair value of $ 5.2 million, resulting in the recognition of a gain of $ 5.2 million, which is recorded as a component of noninterest income in the accompanying consolidated statements of income. The acquisition date fair value of the previously held equity method investment was calculated using multiple factors, including the total consideration for the acquired ownership interest of Lincoln Agency and an analysis of control premiums paid for similar transactions. The purchase agreement for Lincoln Agency includes potential earnout payments of up to $ 250,000 based on net product line revenue for fiscal year 2023 and up to an additional $ 750,000 based on compound annual revenue growth for fiscal year 2024. The Company included the $ 795,000 fair value of this contingent liability as a component of other liabilities on the accompanying consolidated balance sheets at December 31, 2021. At December 31, 2022, the contingent liability was valued at $ 825,000 in accordance with ASC Topic 805. Additionally, the Company acquired certain assets, including 100 % of the book of business, and assumed certain liabilities of Pulley-White on December 31, 2021, for $ 2.2 million in cash and $ 2.2 million in Company common stock. The purchase agreement for Pulley-White includes potential earnout payments of up to an additional $ 250,000 provided the revenue attributable to the legacy operations of Pulley-White for the two years ended December 31, 2023, achieves certain compounded annual growth rate metrics and payments of up to $ 500,000 provided the revenue attributable to the legacy operations of Pulley-White for the three years ended December 31, 2024, achieves certain compounded annual growth rate metrics. The Company included the $ 574,000 fair value of this contingent liability as a component of other liabilities on the accompanying consolidated balance sheets at December 31, 2021. At December 31, 2022, the contingent liability was valued at $ 631,000 in accordance with ASC Topic 805. 100 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements A summary of the fair value of assets acquired and liabilities assumed from the insurance acquisitions was as follows: (Dollars in thousands) Estimated Fair Value Assets Acquired: Definite-lived intangibles $ 14,067 Operating lease right of use assets 1,488 Prepaid expense and other assets 18 Total assets acquired 15,573 Liabilities Assumed: Operating lease liability 1,488 Net assets acquired 14,085 Total consideration 21,497 Goodwill $ 7,412 The fair value of assets acquired and liabilities assumed were preliminary and based on valuation estimates and assumptions at December 31, 2021. The Company continued to analyze the valuations and accounting associated with the acquired assets and assumed liabilities and received updated information during the first quarter of 2022, resulting in a $ 215,000 downward adjustment to the goodwill associated with the acquisitions of Lincoln Agency and Pulley-White. With these acquisitions, the Company continues to expand the scope of product offerings to its banking customers. $ 4.6 million of goodwill associated with these acquisitions is deductible for income tax purposes. A summary of total consideration was as follows: (Dollars in thousands) December 31, 2021 Cash paid $ 7,457 Common stock issued ( 177,348 shares) 7,458 Contingent consideration 1,369 Fair value of previously held interest in Lincoln Agency 5,213 Total consideration $ 21,497 The Company has determined the insurance acquisitions constitute a business combination as defined by ASC Topic 805, which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and the liabilities assumed. The Company has recorded the assets purchased and liabilities assumed at their estimated fair value in accordance with ASC Topic 805. The fair value of assets acquired and liabilities assumed in the insurance acquisitions are final. Pro forma results of aggregate operations for the insurance acquisitions are not presented because these acquisitions are not material to the Company's consolidated results of operations. 101 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 4 - Securities The following table is a summary of the amortized cost and estimated fair value, including the allowance for credit losses and gross unrealized gains and losses, of available for sale, held to maturity and securities carried at fair value through income for the dates indicated: (Dollars in thousands) December 31, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Allowance for Credit Losses Net Carrying Amount Available for sale: State and municipal securities $ 447,086 $ 996 $ ( 58,605 ) $ 389,477 $ — $ 389,477 Corporate bonds 89,449 — ( 7,191 ) 82,258 — 82,258 U.S. government and agency securities 264,755 4 ( 16,339 ) 248,420 — 248,420 Commercial mortgage-backed securities 105,536 — ( 13,593 ) 91,943 — 91,943 Residential mortgage-backed securities 649,765 — ( 77,462 ) 572,303 — 572,303 Commercial collateralized mortgage obligations 44,330 — ( 5,517 ) 38,813 — 38,813 Residential collateralized mortgage obligations 170,136 — ( 23,766 ) 146,370 — 146,370 Asset-backed securities 73,918 — ( 2,018 ) 71,900 — 71,900 Total $ 1,844,975 $ 1,000 $ ( 204,491 ) $ 1,641,484 $ — $ 1,641,484 Held to maturity: State and municipal securities $ 12,174 $ 278 $ ( 482 ) $ 11,970 $ ( 899 ) $ 11,275 Securities carried at fair value through income: State and municipal securities (1) $ 7,100 $ — $ — $ 6,368 $ — $ 6,368 December 31, 2021 Available for sale: State and municipal securities $ 394,046 $ 14,095 $ ( 2,323 ) $ 405,818 $ — $ 405,818 Corporate bonds 80,498 2,509 ( 273 ) 82,734 — 82,734 U.S. government and agency securities 98,892 2 ( 1,236 ) 97,658 — 97,658 Commercial mortgage-backed securities 65,691 — ( 1,448 ) 64,243 — 64,243 Residential mortgage-backed securities 559,655 3,751 ( 5,605 ) 557,801 — 557,801 Commercial collateralized mortgage obligations 20,000 2 ( 330 ) 19,672 — 19,672 Residential collateralized mortgage obligations 196,691 460 ( 3,411 ) 193,740 — 193,740 Asset-backed securities 81,985 1,077 — 83,062 — 83,062 Total $ 1,497,458 $ 21,896 $ ( 14,626 ) $ 1,504,728 $ — $ 1,504,728 Held to maturity: State and municipal securities $ 22,934 $ 2,183 $ — $ 25,117 $ ( 167 ) $ 22,767 Securities carried at fair value through income: State and municipal securities (1) $ 7,375 $ — $ — $ 7,497 $ — $ 7,497 ________________________ (1) Securities carried at fair value through income have no unrealized gains or losses at the consolidated balance sheet dates as all changes in value have been recognized in the consolidated statements of income. See Note 6 - Fair Value of Financial Instruments for more information. On August 1, 2022, the Company completed the merger with BT Holdings, Inc. and acquired $ 456.8 million of available for sale securities from BTH, $ 447.5 million of which were sold during the third quarter of 2022, and classified the remaining as available-for-sale at the merger date. 102 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Securities with unrealized losses at December 31, 2022, and 2021, aggregated by investment category and those individual securities that have been in a continuous unrealized loss position for less than 12 months, and for 12 months or more, were as follows. Less than 12 Months 12 Months or More Total (Dollars in thousands) December 31, 2022 Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Available for sale: State and municipal securities $ 171,079 $ ( 14,947 ) $ 175,011 $ ( 43,658 ) $ 346,090 $ ( 58,605 ) Corporate bonds 69,618 ( 5,581 ) 11,640 ( 1,610 ) 81,258 ( 7,191 ) U.S. government and agency securities 152,471 ( 7,373 ) 95,576 ( 8,966 ) 248,047 ( 16,339 ) Commercial mortgage-backed securities 37,083 ( 3,416 ) 54,860 ( 10,177 ) 91,943 ( 13,593 ) Residential mortgage-backed securities 231,848 ( 20,465 ) 340,455 ( 56,997 ) 572,303 ( 77,462 ) Commercial collateralized mortgage obligations 21,999 ( 2,516 ) 16,814 ( 3,001 ) 38,813 ( 5,517 ) Residential collateralized mortgage obligations 48,749 ( 3,928 ) 97,621 ( 19,838 ) 146,370 ( 23,766 ) Asset-backed securities 62,047 ( 1,528 ) 9,853 ( 490 ) 71,900 ( 2,018 ) Total $ 794,894 $ ( 59,754 ) $ 801,830 $ ( 144,737 ) $ 1,596,724 $ ( 204,491 ) Held to maturity: State and municipal securities $ 6,518 $ ( 482 ) $ — $ — $ 6,518 $ ( 482 ) December 31, 2021 Available for sale: State and municipal securities $ 82,627 $ ( 1,651 ) $ 16,617 $ ( 672 ) $ 99,244 $ ( 2,323 ) Corporate bonds 13,299 ( 201 ) 2,928 ( 72 ) 16,227 ( 273 ) U.S. government and agency securities 97,010 ( 1,234 ) 440 ( 2 ) 97,450 ( 1,236 ) Commercial mortgage-backed securities 57,703 ( 1,167 ) 6,540 ( 281 ) 64,243 ( 1,448 ) Residential mortgage-backed securities 409,382 ( 5,577 ) 1,693 ( 28 ) 411,075 ( 5,605 ) Commercial collateralized mortgage obligations 14,568 ( 330 ) — — 14,568 ( 330 ) Residential collateralized mortgage obligations 127,080 ( 2,623 ) 31,301 ( 788 ) 158,381 ( 3,411 ) Total $ 801,669 $ ( 12,783 ) $ 59,519 $ ( 1,843 ) $ 861,188 $ ( 14,626 ) Held to maturity: State and municipal securities $ — $ — $ — $ — $ — $ — At December 31, 2022, the Company had 716 individual securities that were in an unrealized loss position. Management evaluates available for sale debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than the cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value. Management does not have the intent to sell any of the securities in an unrealized loss position and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, at December 31, 2022, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company’s consolidated statements of income. 103 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The following table presents the activity in the allowance for credit losses for held-to-maturity debt securities. (Dollars in thousands) Municipal Securities Allowance for credit losses: 2022 2021 2020 Balance at January 1, $ 167 $ 66 $ — Impact of adopting ASC 326 — — 96 Provision expense for credit loss for held to maturity securities 732 101 ( 30 ) Balance at December 31, $ 899 $ 167 $ 66 Accrued interest of $ 8.2 million and $ 6.1 million was not included in the calculation of the allowance or the amortized cost basis of the debt securities at December 31, 2022 or 2021, respectively. There were no past due held-to-maturity securities or held-to-maturity securities in nonaccrual status at December 31, 2022 or 2021. Proceeds from sales and calls, and related gross gains and losses of securities available for sale, are shown below. Year Ended December 31, (Dollars in thousands) 2022 2021 2020 Proceeds from sales/calls $ 487,544 $ 44,893 $ 64,702 Gross realized gains 3,810 1,780 774 Gross realized losses ( 2,146 ) ( 32 ) ( 194 ) The following table presents the amortized cost and fair value of securities available for sale and held to maturity at December 31, 2022, grouped by contractual maturity. Mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, which do not have contractual payments due at a single maturity date, are shown separately. Actual maturities for mortgage-backed securities, collateralized mortgage obligations and asset-backed securities will differ from contractual maturities as a result of prepayments made on the underlying loans. (Dollars in thousands) Held to Maturity Available for Sale December 31, 2022 Amortized Cost Fair Value Amortized Cost Fair Value Due in one year or less $ — $ — $ 40,486 $ 39,652 Due after one year through five years — — 268,038 254,924 Due after five years through ten years 5,174 5,453 216,860 195,910 Due after ten years 7,000 6,517 275,906 229,669 Commercial mortgage-backed securities — — 105,536 91,943 Residential mortgage-backed securities — — 649,765 572,303 Commercial collateralized mortgage obligations — — 44,330 38,813 Residential collateralized mortgage obligations — — 170,136 146,370 Asset-backed securities — — 73,918 71,900 Total $ 12,174 $ 11,970 $ 1,844,975 $ 1,641,484 The following table presents carrying amounts of securities pledged as collateral for deposits and repurchase agreements at the periods presented. (Dollars in thousands) December 31, 2022 December 31, 2021 Carrying value of securities pledged to secure public deposits $ 769,691 $ 331,651 Carrying value of securities pledged to repurchase agreements 6,797 10,312 104 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 5 - Loans Loans consist of the following: (Dollars in thousands) December 31, 2022 December 31, 2021 Loans held for sale $ 49,957 $ 80,387 LHFI: Loans secured by real estate: Commercial real estate $ 2,304,678 $ 1,693,512 Construction/land/land development 945,625 530,083 Residential real estate 1,477,538 909,739 Total real estate 4,727,841 3,133,334 Commercial and industrial 2,051,161 1,454,235 Mortgage warehouse lines of credit 284,867 627,078 Consumer 26,153 16,684 Total LHFI (1) 7,090,022 5,231,331 Less: Allowance for loan credit losses 87,161 64,586 LHFI, net $ 7,002,861 $ 5,166,745 ____________________________ (1) Includes purchase accounting adjustment and net deferred loan fees of $ 14.2 million at December 31, 2022, and net deferred loan fees of $ 9.6 million at December 31, 2021. There were no merger date loan fair value adjustments at December 31, 2021. On August 1, 2022, the Company completed the merger with BTH. As of the merger date, BTH had approximately $ 1.24 billion in loans and the Company recorded a Day 1 fair value purchase accounting net discount of $ 5.1 million. As of December 31, 2022, the remaining purchase accounting net loan discount was $ 2.2 million. Credit quality indicators. As part of the Company's commitment to managing the credit quality of its loan portfolio, management annually and periodically updates and evaluates certain credit quality indicators, which include but are not limited to (i) weighted-average risk rating of the loan portfolio, (ii) net charge-offs, (iii) level of non-performing loans, (iv) level of classified loans (defined as substandard, doubtful and loss), and (v) the general economic conditions in the cities and states in which the Company operates. The Company maintains an internal risk rating system where ratings are assigned to individual loans based on assessed risk. Loan risk ratings are the primary indicator of credit quality for the loan portfolio and are continually evaluated to ensure they are appropriate based on currently available information. 105 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The following is a summary description of the Company's internal risk ratings: • Pass (1-6) Loans within this risk rating are further categorized as follows: Minimal risk (1) Well-collateralized by cash equivalent instruments held by the Banks. Moderate risk (2) Borrowers with excellent asset quality and liquidity. Borrowers' capitalization and liquidity exceed industry norms. Borrowers in this category have significant levels of liquid assets and have a low level of leverage. Better than average risk (3) Borrowers with strong financial strength and excellent liquidity that consistently demonstrate strong operating performance. Borrowers in this category generally have a sizable net worth that can be converted into liquid assets within 12 months. Average risk (4) Borrowers with sound credit quality and financial performance, including liquidity. Borrowers are supported by sufficient cash flow coverage generated through operations across the full business cycle. Marginally acceptable risk (5) Loans generally meet minimum requirements for an acceptable loan in accordance with lending policy, but possess one or more attributes that cause the overall risk profile to be higher than the majority of newly approved loans. Watch (6) A passing loan with one or more factors that identify a potential weakness in the overall ability of the borrower to repay the loan. These weaknesses are generally mitigated by other factors that reduce the risk of delinquency or loss. • Special Mention (7) This grade is intended to be temporary and includes borrowers whose credit quality has deteriorated and is at risk of further decline. • Substandard (8) This grade includes "Substandard" loans under regulatory guidelines. Substandard loans exhibit a well-defined weakness that jeopardizes debt repayment in accordance with contractual agreements, even though the loan may be performing. These obligations are characterized by the distinct possibility that a loss may be incurred if these weaknesses are not corrected and repayment may be dependent upon collateral liquidation or secondary source of repayment. • Doubtful (9) This grade includes "Doubtful" loans under regulatory guidelines. Such loans are placed on nonaccrual status and repayment may be dependent upon collateral with no readily determinable valuation or valuations that are highly subjective in nature. Repayment for these loans is considered improbable based on currently existing facts and circumstances. • Loss (0) This grade includes "Loss" loans under regulatory guidelines. Loss loans are charged-off or written down when repayment is not expected. In connection with the review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. The list of loans to be reviewed for possible individual evaluation consists of nonaccrual commercial loans over $100,000 with direct exposure, unsecured loans over 90 days past due, commercial loans classified substandard or worse over $100,000 with direct exposure, TDRs, consumer loans greater than $100,000 with a FICO score under 625, loans greater than $100,000 in which the borrower has filed bankruptcy, and all loans 180 days or more past due. Loans under $50,000 will be evaluated collectively in designated pools unless a loss exposure has been identified. Some additional risk elements considered by loan type 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 106 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements • 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. Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as other individually evaluated loans. The Company held approximately $ 48.1 million of unpaid principal balance PCD loans at December 31, 2022, as a result of the merger with BTH on August 1, 2022, and none at December 31, 2021. Please see Note 1 - Significant Accounting Policies in these Notes to Consolidated Financial Statements for a description of our accounting policies related to purchased financial assets with credit deterioration. 107 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The following table reflects recorded investments in loans by credit quality indicator and origination year at December 31, 2022, excluding loans held for sale and loans accounted for at fair value. Loans acquired are shown in the table by origination year, not merger date. The Company had an immaterial amount of revolving loans converted to term loans at December 31, 2022. Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total Commercial real estate: Pass $ 885,244 $ 502,287 $ 283,368 $ 230,040 $ 168,079 $ 131,411 $ 69,952 $ 2,270,381 Special mention — — — — 8,174 1,359 1,558 11,091 Classified 930 1,795 1,551 4,014 2,965 11,901 50 23,206 Total commercial real estate loans $ 886,174 $ 504,082 $ 284,919 $ 234,054 $ 179,218 $ 144,671 $ 71,560 $ 2,304,678 Current period gross charge-offs $ — $ — $ — $ — $ — $ 166 $ — $ 166 Current period gross recoveries — 31 — — 6 3 — 40 Current period net charge-offs (recoveries) $ — $ ( 31 ) $ — $ — $ ( 6 ) $ 163 $ — $ 126 Construction/land/land development: Pass $ 445,943 $ 320,951 $ 58,880 $ 27,381 $ 27,753 $ 5,253 $ 48,436 $ 934,597 Special mention 6,217 — — — — — — 6,217 Classified 180 100 286 38 160 1,708 2,339 4,811 Total construction/land/land development loans $ 452,340 $ 321,051 $ 59,166 $ 27,419 $ 27,913 $ 6,961 $ 50,775 $ 945,625 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — 200 11 — 211 Current period net charge-offs (recoveries) $ — $ — $ — $ — $ ( 200 ) $ ( 11 ) $ — $ ( 211 ) Residential real estate: Pass $ 535,739 $ 308,070 $ 261,293 $ 107,530 $ 48,652 $ 123,052 $ 80,375 $ 1,464,711 Special mention — — 390 — — — — 390 Classified 2,227 2,764 90 1,494 1,064 4,653 145 12,437 Total residential real estate loans $ 537,966 $ 310,834 $ 261,773 $ 109,024 $ 49,716 $ 127,705 $ 80,520 $ 1,477,538 Current period gross charge-offs $ — $ — $ — $ — $ — $ 91 $ — $ 91 Current period gross recoveries — — — 75 — 27 — 102 Current period net charge-offs (recoveries) $ — $ — $ — $ ( 75 ) $ — $ 64 $ — $ ( 11 ) 108 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total Commercial and industrial: Pass $ 454,813 $ 239,411 $ 82,168 $ 75,043 $ 40,534 $ 29,745 $ 1,083,221 $ 2,004,935 Special mention 8,683 2,563 — — 187 — 1,620 13,053 Classified 3,641 11,455 188 1,978 1,224 3 14,684 33,173 Total commercial and industrial loans $ 467,137 $ 253,429 $ 82,356 $ 77,021 $ 41,945 $ 29,748 $ 1,099,525 $ 2,051,161 Current period gross charge-offs $ 28 $ 726 $ 48 $ 869 $ 337 $ 1,103 $ 5,348 $ 8,459 Current period gross recoveries 42 213 4 141 21 2,436 968 3,825 Current period net charge-offs (recoveries) $ ( 14 ) $ 513 $ 44 $ 728 $ 316 $ ( 1,333 ) $ 4,380 $ 4,634 Mortgage Warehouse Lines of Credit: Pass $ — $ — $ — $ — $ — $ — $ 282,298 $ 282,298 Special mention — — — — — — 2,042 2,042 Classified — — — — — — 527 527 Total mortgage warehouse lines of credit $ — $ — $ — $ — $ — $ — $ 284,867 $ 284,867 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Pass $ 9,730 $ 3,822 $ 1,210 $ 784 $ 135 $ 15 $ 10,408 $ 26,104 Classified 22 19 — 6 — — 2 49 Total consumer loans $ 9,752 $ 3,841 $ 1,210 $ 790 $ 135 $ 15 $ 10,410 $ 26,153 Current period gross charge-offs $ 3 $ 27 $ 7 $ 2 $ 1 $ 1 $ 2 $ 43 Current period gross recoveries — — 7 — 3 5 1 16 Current period net charge-offs (recoveries) $ 3 $ 27 $ — $ 2 $ ( 2 ) $ ( 4 ) $ 1 $ 27 The following table reflects recorded investments in loans by credit quality indicator and origination year at December 31, 2021, excluding loans held for sale and loans accounted for at fair value. The Company had an immaterial amount of revolving loans converted to term loans at December 31, 2021. Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Commercial real estate: Pass $ 556,218 $ 369,128 $ 278,045 $ 236,543 $ 111,308 $ 86,498 $ 22,904 $ 1,660,644 Special mention — — — 8,392 15,828 — — 24,220 Classified 2,045 625 772 2,456 299 2,288 163 8,648 Total commercial real estate loans $ 558,263 $ 369,753 $ 278,817 $ 247,391 $ 127,435 $ 88,786 $ 23,067 $ 1,693,512 Current period gross charge-offs $ — $ — $ — $ 120 $ 24 $ 26 $ — $ 170 Current period gross recoveries — — — 48 3 14 — 65 Current period net charge-offs (recoveries) $ — $ — $ — $ 72 $ 21 $ 12 $ — $ 105 109 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Construction/land/land development: Pass $ 256,212 $ 102,459 $ 85,442 $ 32,128 $ 5,422 $ 553 $ 30,729 $ 512,945 Special mention — — 8,126 — 1,003 — — 9,129 Classified 443 297 272 1,677 158 — 5,162 8,009 Total construction/land/land development loans $ 256,655 $ 102,756 $ 93,840 $ 33,805 $ 6,583 $ 553 $ 35,891 $ 530,083 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Residential real estate: Pass $ 313,898 $ 252,115 $ 109,564 $ 52,515 $ 45,042 $ 59,690 $ 60,342 $ 893,166 Special mention — 174 — 421 477 — — 1,072 Classified 1,398 191 2,393 2,848 1,819 6,606 246 15,501 Total residential real estate loans $ 315,296 $ 252,480 $ 111,957 $ 55,784 $ 47,338 $ 66,296 $ 60,588 $ 909,739 Current period gross charge-offs $ — $ 7 $ 61 $ — $ — $ 10 $ — $ 78 Current period gross recoveries — 21 19 — 25 52 — 117 Current period net charge-offs (recoveries) $ — $ ( 14 ) $ 42 $ — $ ( 25 ) $ ( 42 ) $ — $ ( 39 ) Commercial and industrial: Pass $ 448,377 $ 164,910 $ 93,488 $ 64,791 $ 14,742 $ 24,014 $ 599,144 $ 1,409,466 Special mention 259 2,170 — 1,519 — — 3,752 7,700 Classified 14,378 167 2,978 3,849 3,849 3,008 8,840 37,069 Total commercial and industrial loans $ 463,014 $ 167,247 $ 96,466 $ 70,159 $ 18,591 $ 27,022 $ 611,736 $ 1,454,235 Current period gross charge-offs $ 9 $ 1,172 $ 54 $ 5 $ 1,467 $ 6,354 $ 2,862 $ 11,923 Current period gross recoveries — 18 51 3 102 204 339 717 Current period net charge-offs (recoveries) $ 9 $ 1,154 $ 3 $ 2 $ 1,365 $ 6,150 $ 2,523 $ 11,206 Mortgage Warehouse Lines of Credit: Pass $ — $ — $ — $ — $ — $ — $ 627,078 $ 627,078 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Pass $ 6,976 $ 2,169 $ 1,467 $ 443 $ 55 $ 67 $ 5,407 $ 16,584 Classified 26 21 1 — — 1 51 100 Total consumer loans $ 7,002 $ 2,190 $ 1,468 $ 443 $ 55 $ 68 $ 5,458 $ 16,684 Current period gross charge-offs $ — $ 5 $ 29 $ 2 $ — $ 9 $ 18 $ 63 Current period gross recoveries — — 20 7 1 17 4 49 Current period net charge-offs (recoveries) $ — $ 5 $ 9 $ ( 5 ) $ ( 1 ) $ ( 8 ) $ 14 $ 14 110 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The following tables present the Company's loan portfolio aging analysis at the dates indicated: December 31, 2022 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Loans Past Due 90 Days or More Total Past Due Current Loans Total Loans Receivable Accruing Loans 90 or More Days Past Due Loans secured by real estate: Commercial real estate $ 31 $ — $ 104 $ 135 $ 2,304,543 $ 2,304,678 $ — Construction/land/land development 854 — 17 871 944,754 945,625 — Residential real estate 1,814 891 450 3,155 1,474,383 1,477,538 — Total real estate 2,699 891 571 4,161 4,723,680 4,727,841 — Commercial and industrial 3,878 1,972 544 6,394 2,044,767 2,051,161 — Mortgage warehouse lines of credit — — — — 284,867 284,867 — Consumer 350 16 11 377 25,776 26,153 — Total LHFI $ 6,927 $ 2,879 $ 1,126 $ 10,932 $ 7,079,090 $ 7,090,022 $ — December 31, 2021 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Loans Past Due 90 Days or More Total Past Due Current Loans Total Loans Receivable Accruing Loans 90 or More Days Past Due Loans secured by real estate: Commercial real estate $ 22 $ — $ 197 $ 219 $ 1,693,293 $ 1,693,512 $ — Construction/land/land development — 129 52 181 529,902 530,083 — Residential real estate 2,245 352 10,331 12,928 896,811 909,739 — Total real estate 2,267 481 10,580 13,328 3,120,006 3,133,334 — Commercial and industrial 77 1,172 10,927 12,176 1,442,059 1,454,235 — Mortgage warehouse lines of credit — — — — 627,078 627,078 — Consumer 90 — 21 111 16,573 16,684 — Total LHFI $ 2,434 $ 1,653 $ 21,528 $ 25,615 $ 5,205,716 $ 5,231,331 $ — 111 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements U.S. GAAP requires that a discount or premium, and also an allowance for credit losses be recorded on acquired loans. The Company completed the merger with BTH on August 1, 2022. As a result, the Company recorded $ 5.1 million in net loan discounts and a $ 5.5 million increase in the allowance for credit losses related to PCD loans. In addition, the Company recorded a Day 1 $ 14.9 million provision for loan credit losses on non-PCD loans required by the Current Expected Credit Losses ("CECL") guidance. The following tables detail activity in the allowance for loan credit losses by portfolio segment. Accrued interest of $ 27.1 million and $ 15.9 million was not included in the book value for the purposes of calculating the allowance at December 31, 2022 and 2021, respectively. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Year Ended December 31, 2022 Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total (Dollars in thousands) Beginning Balance $ 13,425 $ 4,011 $ 6,116 $ 40,146 $ 340 $ 548 $ 64,586 Allowance for loan credit losses - BTH merger 1 — — 5,525 — 1 5,527 Charge-offs 166 — 91 8,459 — 43 8,759 Recoveries 40 211 102 3,825 — 16 4,194 Provision (1)(2) 6,472 3,554 2,103 9,111 39 334 21,613 Ending Balance $ 19,772 $ 7,776 $ 8,230 $ 50,148 $ 379 $ 856 $ 87,161 Average Balance $ 1,951,246 $ 708,758 $ 1,143,190 $ 1,675,719 $ 420,639 $ 20,913 $ 5,920,465 Net Charge-offs to Loan Average Balance 0.01 % ( 0.03 ) % — % 0.28 % — % 0.13 % 0.08 % _________________________ (1) The $ 24.7 million provision for credit losses on the consolidated statement of income includes a $ 21.6 million provision for loan losses, a $ 2.3 million provision for off-balance sheet commitments and a $ 732,000 provision for held to maturity securities credit losses for the year ended December 31, 2022. (2) Excluded from the allowance is $ 10.8 million in PCD loans that were acquired in the merger with BTH that were added to the allowance and immediately written off. Year Ended December 31, 2021 Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total (Dollars in thousands) Beginning Balance $ 15,430 $ 8,191 $ 9,418 $ 51,857 $ 856 $ 918 $ 86,670 Charge-offs 170 — 78 11,923 — 63 12,234 Recoveries 65 — 117 717 — 49 948 Provision (1) ( 1,900 ) ( 4,180 ) ( 3,341 ) ( 505 ) ( 516 ) ( 356 ) ( 10,798 ) Ending Balance $ 13,425 $ 4,011 $ 6,116 $ 40,146 $ 340 $ 548 $ 64,586 Average Balance $ 1,501,890 $ 528,618 $ 916,039 $ 1,627,077 $ 753,588 $ 16,764 $ 5,343,976 Net Charge-offs to Loan Average Balance 0.01 % — % — % 0.69 % — % 0.08 % 0.21 % _________________________ (1) The $ 10.8 million provision for credit losses net benefit on the consolidated statement of income includes a $ 10.8 million provision for loan losses net benefit, a $ 68,000 benefit for off-balance sheet commitments and a $ 101,000 provision for held to maturity securities credit losses for the year ended December 31, 2021. 112 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Year Ended December 31, 2020 Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total (Dollars in thousands) Beginning Balance $ 10,013 $ 3,711 $ 6,332 $ 16,960 $ 262 $ 242 $ 37,520 Impact of Adopting ASC 326 ( 5,052 ) 1,141 ( 2,526 ) 7,296 29 360 $ 1,248 Charge-offs 4,924 — 692 6,702 — 76 12,394 Recoveries 19 1 202 1,022 — 24 1,268 Provision (1) 15,374 3,338 6,102 33,281 565 368 59,028 Ending Balance $ 15,430 $ 8,191 $ 9,418 $ 51,857 $ 856 $ 918 $ 86,670 Average Balance $ 1,322,477 $ 554,038 $ 769,838 $ 1,710,648 $ 574,837 $ 18,707 $ 4,950,545 Net Charge-offs to Loan Average Balance 0.37 % — % 0.06 % 0.33 % — % 0.28 % 0.22 % _________________________ (1) The $ 59.9 million provision for credit losses on the consolidated statement of income includes a $ 59.0 million net loan loss provision, a 902,000 provision for off-balance sheet commitments and a 30,000 provision benefit for held to maturity securities credit losses for the year ended December 31, 2020. The increase in provision expense during the year ended December 31, 2022, is primarily due to the merger with BTH, completed on August 1, 2022, which required a Day 1 CECL loan provision of $ 14.9 million for loan credit losses on non-PCD loans along with a $ 5.5 million allowance for loan credit losses on PCD loans. The allowance for loan credit losses increased $ 22.6 million compared to December 31, 2021, mainly due to a $ 23.9 million allowance for BTH loans at December 31, 2022. Qualitative factor changes across the Company's risk pools, which includes the impact of the BTH acquired loans, drove a $ 22.4 million increase for the year ended December 31, 2022. The decrease in provision expense during the year ended December 31, 2021, compared to the year ended December 31, 2020, was primarily due to improvement in forecasted economic conditions during the year ended December 31, 2021, as compared to continuing uncertainty related to ongoing economic impact and duration of the COVID-19 pandemic during the year ended December 31, 2020. The Company's credit quality profile in relation to the allowance for loan credit losses drove a decline of $ 25.1 million in the collectively evaluated portion of the reserve during the year ended December 31, 2021, of which a $ 19.6 million decrease was related to qualitative factor changes across the Company's risk pools for the year ended December 31, 2021. These declines were partially offset by an increase in certain specific loan reserves at December 31, 2021. The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related Allowance for Loan Credit Losses ("ALCL") allocated to these loans. December 31, 2022 (Dollars in thousands) Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total Real Estate $ 273 $ 97 $ 6,731 $ — $ — $ — $ 7,101 Accounts Receivable — — — 831 — — 831 Equipment — — — 285 — — 285 Total $ 273 $ 97 $ 6,731 $ 1,116 $ — $ — $ 8,217 ACL Allocation $ — $ — $ — $ 738 $ — $ — $ 738 113 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements December 31, 2021 (Dollars in thousands) Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total Real Estate $ 166 $ — $ 8,150 $ — $ — $ — $ 8,316 Accounts Receivable — — — 7,783 — — 7,783 Equipment — — — 601 — — 601 Total $ 166 $ — $ 8,150 $ 8,384 $ — $ — $ 16,700 ACL Allocation $ — $ — $ 19 $ 6,563 $ — $ — $ 6,582 Collateral-dependent loans consist primarily of residential real estate and commercial and industrial loans. These loans are individually evaluated when foreclosure is probable or when the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral. In the case of commercial and industrial loans secured by equipment, the fair value of the collateral is estimated by third-party valuation experts. Loan balances are charged down to the underlying collateral value when they are deemed uncollectible. Note that the Company did not elect to use the collateral maintenance agreement practical expedient available under CECL. Nonaccrual LHFI were as follows: Nonaccrual With No Allowance for Credit Loss Nonaccrual (Dollars in thousands) Loans secured by real estate: December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Commercial real estate $ 435 $ 453 $ 526 $ 512 Construction/land/land development 59 52 270 338 Residential real estate 7,023 7,684 7,712 11,647 Total real estate 7,517 8,189 8,508 12,497 Commercial and industrial 527 58 1,383 12,306 Mortgage warehouse lines of credit — — — — Consumer — — 49 100 Total nonaccrual loans $ 8,044 $ 8,247 $ 9,940 $ 24,903 All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. At December 31, 2022 and 2021, the Company had no funding commitments for which the terms were modified in TDRs. For the year ended December 31, 2022, 2021 and 2020 gross interest income, that would have been recorded had the nonaccruing loans been current in accordance with their original terms, was $ 1.3 million, $ 1.9 million and $ 1.5 million, respectively. No interest income was recorded on these loans while they were considered nonaccrual during the years ended December 31, 2022, 2021 and 2020. The Company elects the fair value option for recording residential mortgage loans held for sale in accordance with U.S. GAAP. The Company had $ 3.9 million of nonaccrual mortgage loans held for sale that were recorded using the fair value option election at December 31, 2022, compared to $ 1.8 million at December 31, 2021. 114 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Loans classified as TDRs were as follows: (Dollars in thousands) December 31, 2022 December 31, 2021 TDRs Nonaccrual TDRs $ 4,389 $ 4,064 Performing TDRs 3,248 2,763 Total $ 7,637 $ 6,827 The tables below summarize loans classified as TDRs by loan and concession type during the dates indicated. Year Ended December 31, 2022 (Dollars in thousands) Number of Loans Restructured Pre-Modification Recorded Balance Term Concessions Interest Rate Concessions Combination of Term and Rate Concessions Total Modifications Loans secured by real estate: Commercial real estate (1) 1 $ 214 $ — $ — $ 211 $ 211 Construction/land/land development 2 850 695 — 97 792 Residential real estate 3 3,822 122 3,570 — 3,692 Total real estate 6 4,886 817 3,570 308 4,695 Commercial and industrial 1 20 20 — — 20 Total 7 $ 4,906 $ 837 $ 3,570 $ 308 $ 4,715 ________________________ (1) Acquired in connection with the BTH merger. Year Ended December 31, 2021 (Dollars in thousands) Number of Loans Restructured Pre-Modification Recorded Balance Term Concessions Interest Rate Concessions Combination of Term and Rate Concessions Total Modifications Residential real estate 1 $ 31 $ 26 $ — $ — $ 26 Commercial and industrial 1 100 100 — — 100 Total 2 $ 131 $ 126 $ — $ — $ 126 Year Ended December 31, 2020 (Dollars in thousands) Number of Loans Restructured Pre-Modification Recorded Balance Term Concessions Interest Rate Concessions Combination of Term and Rate Concessions Total Modifications Loans secured by real estate: Commercial real estate 2 $ 1,696 $ 1,694 $ — $ — $ 1,694 Residential real estate 5 1,212 — 177 877 1,054 Total real estate 7 2,908 1,694 177 877 2,748 Commercial and industrial 5 217 193 — — 193 Consumer 1 2 — — 2 2 Total 13 $ 3,127 $ 1,887 $ 177 $ 879 $ 2,943 115 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements There were no loans that defaulted during the year ended December 31, 2022, after having been modified as a TDR within the previous 12 months. During the year ended December 31, 2021, one loan with an outstanding principal balance of $ 9,000 defaulted after having been modified as a TDR within the previous 12 months. During the year ended December 31, 2020, no loans defaulted after having been modified as a TDR within the previous 12 months. A payment default is defined as a loan that was 90 or more days past due. The Company monitors the performance of the modified loans to their restructured terms on an ongoing basis. In the event of subsequent default, the allowance for loan credit losses continues to be reassessed on the basis of an individual evaluation of each loan. The modifications made during the periods presented did not significantly impact the Company's determination of the allowance for credit losses. Note 6 - Fair Value of Financial Instruments Fair value is the exchange price that is expected to be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Certain assets and liabilities are recorded in the Company's consolidated financial statements at fair value. Some are recorded on a recurring basis and some on a non-recurring basis. The Company utilizes fair value measurement to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach to estimate the fair values of its financial instruments. Such valuation techniques are consistently applied. A hierarchy for fair value has been established, which categorizes the valuation techniques into three levels used to measure fair value. The three levels are as follows: Level 1 - Fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 - Fair value is based on significant other observable inputs that are generally determined based on a single price for each financial instrument provided to the Company by an unrelated third-party pricing service and is based on one or more of the following: • Quoted prices for similar, but not identical, assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in markets that are not active; • Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and • Other inputs derived from or corroborated by observable market inputs. Level 3 - Prices or valuation techniques that require inputs that are both significant and unobservable in the market. These instruments are valued using the best information available, some of which is internally developed, and reflects the Company's own assumptions about the risk premiums that market participants would generally require and the assumptions they would use. These estimates can be inherently uncertain. There were no transfers between fair value reporting levels for any period presented. 116 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Fair Values of Assets and Liabilities Recorded on a Recurring Basis The following tables summarize financial assets and financial liabilities recorded at fair value on a recurring basis at December 31, 2022 and 2021, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value. There were no changes in the valuation techniques during 2022 or 2021. December 31, 2022 (Dollars in thousands) Level 1 Level 2 Level 3 Total State and municipal securities $ — $ 334,708 $ 54,769 $ 389,477 Corporate bonds — 81,258 1,000 82,258 U.S. treasury securities 110,645 — — 110,645 U.S. government agency securities — 137,775 — 137,775 Commercial mortgage-backed securities — 91,943 — 91,943 Residential mortgage-backed securities — 572,303 — 572,303 Commercial collateralized mortgage obligations — 38,813 — 38,813 Residential collateralized mortgage obligations — 146,370 — 146,370 Asset-backed securities — 71,900 — 71,900 Securities available for sale 110,645 1,475,070 55,769 1,641,484 Securities carried at fair value through income — — 6,368 6,368 Loans held for sale — 25,389 — 25,389 Mortgage servicing rights — — 20,824 20,824 Other assets - derivatives — 26,733 — 26,733 Total recurring fair value measurements - assets $ 110,645 $ 1,527,192 $ 82,961 $ 1,720,798 Other liabilities - derivatives $ — $ ( 25,275 ) $ — $ ( 25,275 ) Total recurring fair value measurements - liabilities $ — $ ( 25,275 ) $ — $ ( 25,275 ) December 31, 2021 (Dollars in thousands) Level 1 Level 2 Level 3 Total State and municipal securities $ — $ 364,357 $ 41,461 $ 405,818 Corporate bonds — 82,734 — 82,734 U.S. treasury securities 92,245 — — 92,245 U.S. government agency securities — 5,413 — 5,413 Commercial mortgage-backed securities — 64,243 — 64,243 Residential mortgage-backed securities — 557,801 — 557,801 Commercial collateralized mortgage obligations — 19,672 — 19,672 Residential collateralized mortgage obligations — 193,740 — 193,740 Asset-backed securities — 83,062 — 83,062 Securities available for sale 92,245 1,371,022 41,461 1,504,728 Securities carried at fair value through income — — 7,497 7,497 Loans held for sale — 37,032 — 37,032 Mortgage servicing rights — — 16,220 16,220 Other assets - derivatives — 11,459 — 11,459 Total recurring fair value measurements - assets $ 92,245 $ 1,419,513 $ 65,178 $ 1,576,936 Other liabilities - derivatives $ — $ ( 11,494 ) $ — $ ( 11,494 ) Total recurring fair value measurements - liabilities $ — $ ( 11,494 ) $ — $ ( 11,494 ) 117 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the year ended December 31, 2022 and 2021, are summarized as follows: (Dollars in thousands) MSRs Securities Available for Sale Securities at Fair Value Through Income Balance at January 1, 2022 $ 16,220 $ 41,461 $ 7,497 Gain (loss) recognized in earnings: Mortgage banking revenue (1) 1,219 — — Other noninterest income — — ( 854 ) Loss recognized in AOCI — ( 4,421 ) — Purchases, issuances, sales and settlements: Originations 2,286 — — Purchases — 22,384 — Acquired in BTH merger 1,099 — — Settlements — ( 3,655 ) ( 275 ) Balance at December 31, 2022 $ 20,824 $ 55,769 $ 6,368 (Dollars in thousands) Loans at Fair Value MSRs Securities Available for Sale Securities at Fair Value Through Income Balance at January 1, 2021 $ 17,011 $ 13,660 $ 44,065 $ 11,554 Gain (loss) recognized in earnings: Mortgage banking revenue (1) — ( 2,593 ) — — Other noninterest income ( 251 ) — — ( 814 ) Loss recognized in AOCI — — ( 1,263 ) — Purchases, issuances, sales and settlements: Originations — 5,153 — — Purchases — — 1,000 — Settlements ( 16,760 ) — ( 2,341 ) ( 3,243 ) Balance at December 31, 2021 $ — $ 16,220 $ 41,461 $ 7,497 ___________________________ (1) Total mortgage banking revenue includes changes in fair value due to market changes and run-off. The Company obtains fair value measurements for loans at fair value, securities available for sale and securities at fair value through income from an independent pricing service; therefore, quantitative unobservable inputs are unknown. The following methodologies were used to measure the fair value of financial assets and liabilities valued on a recurring basis: Securities Available for Sale Securities classified as available for sale are reported at fair value utilizing Level 1, Level 2 or Level 3 inputs. For Level 1 securities, the Company obtains the fair value measurements for those identical assets from an independent pricing service. For Level 2 securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, market consensus prepayment speeds, credit information and the security's terms and conditions, among other things. In order to ensure the fair values are consistent with ASC 820, Fair Value Measurements and Disclosures , the Company periodically checks the fair value by comparing them to other pricing sources, such as Bloomberg LP. The third-party pricing service is subject to an annual review of internal controls in accordance with the Statement on Standards for Attestation Engagements No. 16, which was made available to the Company. In certain cases where Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. 118 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Mortgage Servicing Rights ("MSRs") The carrying amounts of the MSRs equal fair value, which are determined using a discounted cash flow valuation model. The significant assumptions used to value MSRs were as follows: December 31, 2022 December 31, 2021 Range Weighted Average (1) Range Weighted Average (1) Prepayment speeds 7.65 % - 9.20 % 8.11 % 9.10 % - 36.51 % 15.63 % Discount rates 9.50 - 22.07 12.55 8.89 - 10.39 9.32 __________________________ (1) The weighted average was calculated with reference to the principal balance of the underlying mortgages. In recent years, there have been significant market-driven fluctuations in the assumptions listed above. Loans with higher average coupon rates have a greater likelihood of prepayment during comparatively low interest rate environments, while loans with lower average coupon rates have a lower likelihood of prepayment. The increase in rates since the year ended December 31, 2021, has caused a decrease in our weighted average prepayment speed and an increase in our discount rate assumptions used in the MSR valuation. These fluctuations can be rapid and may continue to be significant. Therefore, estimating these assumptions within ranges that market participants would use in determining the fair value of MSRs requires significant management judgment. During the second half of 2022, the Company recognized an impairment of $ 2.0 million and entered into an agreement to sell its GNMA MSR portfolio, which met all final sale conditions in early 2023. The Company sold approximately $ 1.8 million in GNMA MSR, with no significant additional gain or loss realized, and derecognized the related GNMA repurchase asset and offsetting liability of $ 24.6 million. Derivatives Fair values for interest rate swap agreements and interest rate lock commitments are based upon the amounts that would be required to settle the contracts. Fair values for risk participations, forward mortgage backed security purchases or loan sale commitments and future contracts to purchase United States treasury notes are based on the fair values of the underlying mortgage loans or securities and the probability of such commitments being exercised. Significant management judgment and estimation is required in determining these fair value measurements. Fair Values of Assets Recorded on a Recurring Basis for which the Fair Value Option has been Elected Certain assets are measured at fair value on a recurring basis due to the Company's election to adopt fair value accounting treatment for those assets. This election allows for a more effective offset of the changes in fair values of the assets and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC Topic 815, Derivatives and Hedging. For assets for which the fair value has been elected, the earned current contractual interest payment is recognized in interest income, loan origination costs and fees on fair value option loans are recognized in earnings as incurred and not deferred. At December 31, 2022 and 2021, there were no gains or losses recorded attributable to changes in instrument-specific credit risk. The following tables summarize the difference between the fair value and the unpaid principal balance for financial instruments for which the fair value option has been elected: December 31, 2022 (Dollars in thousands) Aggregate Fair Value Principal Balance/Amortized Cost Difference Loans held for sale (1) $ 25,389 $ 24,946 $ 443 Securities carried at fair value through income 6,368 7,100 ( 732 ) Total $ 31,757 $ 32,046 $ ( 289 ) ____________________________ (1) $ 3.9 million of loans held for sale were designated as nonaccrual or 90 days or more past due at December 31, 2022. Of this balance, $ 3.3 million was guaranteed by U.S. Government agencies. 119 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements December 31, 2021 (Dollars in thousands) Aggregate Fair Value Principal Balance/Amortized Cost Difference Loans held for sale (1) $ 37,032 $ 36,072 $ 960 Securities carried at fair value through income 7,497 7,375 122 Total $ 44,529 $ 43,447 $ 1,082 ____________________________ (1) $ 1.8 million of loans held for sale were designated as nonaccrual or 90 days or more past due at December 31, 2021. Of this balance, $ 1.2 million was guaranteed by U.S. Government agencies. Changes in the fair value of assets for which the Company elected the fair value option are classified in the consolidated statements of income line items reflected in the following table: (Dollars in thousands) Years Ended December 31, Changes in fair value included in noninterest income: 2022 2021 2020 Mortgage banking revenue (loans held for sale) $ ( 517 ) $ ( 5,111 ) $ 5,131 Other income: Loans at fair value held for investment — ( 251 ) ( 53 ) Securities carried at fair value through income ( 854 ) ( 814 ) 493 Total impact on other income ( 854 ) ( 1,065 ) 440 Total fair value option impact on noninterest income (1) $ ( 1,371 ) $ ( 6,176 ) $ 5,571 ____________________________ (1) The fair value option impact on noninterest income is offset by the derivative gain/loss recognized in noninterest income. Please see Note 10 - Mortgage Banking for more detail. The following methodologies were used to measure the fair value of financial assets valued on a recurring basis for which the fair value option was elected: Securities at Fair Value through Income Securities carried at fair value through income are valued using a discounted cash flow with a credit spread applied to each instrument based on the creditworthiness of each issuer. Credit spreads ranged from 83 to 227 basis points at both December 31, 2022 and 2021. The Company believes the fair value approximates an exit price. Loans Held for Sale Fair values for loans held for sale are established using anticipated sale prices for loans allocated to a sale commitment, and those unallocated to a commitment are valued based on the interest rate and term for similar loans allocated. The Company believes the fair value approximates an exit price. Fair Value of Assets Recorded on a Nonrecurring Basis Equity Securities without Readily Determinable Fair Values Equity securities without readily determinable fair values totaled $ 67.4 million and $ 45.2 million at December 31, 2022 and 2021, respectively, and are shown on the face of the consolidated balance sheets. The majority of the Company's equity investments qualify for the practical expedient allowed for equity securities without a readily determinable fair value, such that the Company has elected to carry these securities at cost adjusted for any observable transactions during the period, less any impairment. To date, no impairment has been recorded on the Company's investments in equity securities that do not have readily determinable fair values. Government National Mortgage Association Repurchase Asset The Company recorded $ 24.6 million and $ 43.4 million, respectively, at December 31, 2022 and 2021, for Government National Mortgage Association ("GNMA") repurchase assets included in loans held for sale on the consolidated balance sheets. The assets are valued at the lower of cost or market and, where market is lower than cost, valued using anticipated sale prices for loans allocated to a sale commitment, and those unallocated to a commitment are valued based on the interest rate and term for similar loans allocated. The Company believes the fair value approximates an exit price. 120 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements During the second half of 2022, the Company recognized an impairment of $ 2.0 million and entered into an agreement to sell its GNMA MSR portfolio, which met all final sale conditions in early 2023. The Company sold approximately $ 1.8 million in GNMA MSR, with no significant additional gain or loss realized, and derecognized the related GNMA repurchase asset and offsetting liability of $ 24.6 million. Individually Evaluated Loans with Credit Losses Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured to determine if any credit loss exists. Allowable methods for determining the amount of credit loss include estimating the fair value using the fair value of the collateral for collateral-dependent loans and a discounted cash flow methodology for other evaluated loans that are not collateral dependent. If the loan is identified as collateral-dependent, the fair value method of measuring the amount of credit loss is utilized. Evaluating the fair value of the collateral for collateral-dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. If the loan is not collateral-dependent, the discounted cash flow method is utilized, which involves assumptions and judgments as to credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate. Loans that have experienced a credit loss with specific allocated losses are within Level 3 of the fair value hierarchy when the credit loss is determined using the fair value method. The fair value of loans that have experienced a credit loss with specific allocated losses was approximately $ 20.7 million and $ 4.8 million at December 31, 2022 and 2021, respectively. Non-Financial Assets Foreclosed assets held for sale are the only non-financial assets valued on a non-recurring basis that are initially recorded by the Company at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company's recorded investment in the related loan, a write-down is recognized through a charge to the allowance for loan credit losses. Additionally, valuations are periodically performed by management, and any subsequent reduction in value is recognized by a charge to income. The carrying value and fair value of foreclosed assets held for sale was estimated using Level 3 inputs based on observable market data and was $ 806,000 and $ 1.5 million at December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021, the Company had $ 10,000 and $ 5.9 million, respectively, in principal amount of residential mortgage loans in the process of foreclosure. Fair Values of Financial Instruments Not Recorded at Fair Value Loans The estimated fair value approximates carrying value for variable-rate loans that reprice frequently and with no significant change in credit risk. The fair value of fixed rate loans and variable-rate loans, which reprice on an infrequent basis, is estimated by discounting future cash flows using exit level pricing, which combines the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality and an estimated additional rate to reflect a liquidity premium. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk. Deposits The estimated fair value approximates carrying value for demand deposits. The fair value of fixed rate deposit liabilities with defined maturities is estimated by discounting future cash flows using the interest rates currently available for funding from the FHLB. The estimated fair value of deposits does not take into account the value of our long-term relationships with depositors, commonly known as core deposit intangibles, which are separate intangible assets, and not considered financial instruments. Nonetheless, the Company would likely realize a core deposit premium if the deposit portfolio were sold in the principal market for such deposits. Borrowed Funds The estimated fair value approximates carrying value for short-term borrowings. The fair value of long-term fixed rate and fixed-to-floating-rate borrowings is estimated using quoted market prices, if available, or by discounting future cash flows using current interest rates for similar financial instruments. The estimated fair value approximates carrying value for variable-rate junior subordinated debentures that reprice quarterly. 121 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The carrying value and estimated fair values of financial instruments not recorded at fair value are as follows: (Dollars in thousands) December 31, 2022 December 31, 2021 Financial assets: Level 1 inputs: Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Cash and cash equivalents $ 358,972 $ 358,972 $ 705,618 $ 705,618 Level 2 inputs: Non-marketable equity securities held in other financial institutions 67,378 67,378 45,192 45,192 GNMA repurchase asset 24,569 24,569 43,355 43,355 Accrued interest and loan fees receivable 38,136 38,136 23,402 23,402 Level 3 inputs: Securities held to maturity 11,275 11,970 22,767 25,117 LHFI, net 7,002,861 6,835,770 5,166,745 5,133,257 Financial liabilities: Level 2 inputs: Deposits 7,775,702 7,753,966 6,570,693 6,572,215 FHLB advances and other borrowings 639,230 639,103 309,801 305,374 Subordinated indebtedness 201,765 181,624 157,417 156,629 Accrued interest payable 3,917 3,917 2,696 2,696 Note 7 - Premises and Equipment Major classifications of premises and equipment are summarized below: December 31, (Dollars in thousands) 2022 2021 Land, buildings and improvements $ 102,342 $ 87,313 Furniture, fixtures and equipment 31,648 28,454 Leasehold improvements 21,481 17,864 Construction in process 4,808 1,377 Total premises and equipment 160,279 135,008 Accumulated depreciation ( 60,078 ) ( 54,317 ) Premises and equipment, net $ 100,201 $ 80,691 Depreciation expense for premises and equipment totaled $ 6.8 million, $ 6.0 million and $ 5.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. Note 8 - Leases The Company leases certain real estate, as well as certain equipment, under non-cancelable operating leases that expire at various dates through 2052. The consolidated balance sheets detail and components of the Company's lease expense were as follows: (Dollars in thousands) December 31, 2022 December 31, 2021 Operating lease right of use assets (included in Accrued interest receivable and other assets) $ 32,608 $ 23,732 Operating lease liabilities (included in Accrued expenses and other liabilities) 34,621 25,691 Finance lease liabilities (included in Accrued expenses and other liabilities) 2,551 2,852 Weighted average remaining lease term (years) - operating leases 10.66 9.47 Weighted average discount rate - operating leases 3.71 % 2.89 % 122 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Years Ended (Dollars in thousands) December 31, 2022 December 31, 2021 December 31, 2020 Lease expense: Operating lease expense $ 5,344 $ 4,553 $ 4,680 Other lease expense 365 369 265 Total lease expense $ 5,709 $ 4,922 $ 4,945 Right of use assets obtained in exchange for new operating lease liabilities $ 13,428 $ 5,776 $ 1,338 Maturities of operating lease liabilities at December 31, 2022, were as follows: (Dollars in thousands) December 31, 2022 2023 $ 5,777 2024 4,954 2025 4,431 2026 3,900 2027 3,713 Thereafter 19,317 Total lease payments 42,092 Less: Imputed interest 7,471 Total lease obligations $ 34,621 Supplemental cash flow related to leases was as follows: Year Ended December 31, 2022 December 31, 2021 Cash paid for operating leases $ 5,311 $ 4,890 Note 9 - Goodwill and Other Intangible Assets During 2022, the Company recorded goodwill totaling $ 94.5 million and other intangible assets totaling $ 38.4 million in connection with the merger with BTH. During 2021, the Company recorded goodwill totaling $ 7.4 million and other intangible assets totaling $ 14.1 million in connection with the acquisitions of the Lincoln Agency and Pulley-White. 123 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The components of the Company's goodwill and other intangible assets are as follows: (Dollars in thousands) December 31, 2022 Gross Carrying Amount at Period End Beginning Balance Mergers/Acquisitions Accumulated Amortization Net Carrying Amount at Period End Goodwill $ 34,153 $ 94,526 N/A $ 128,679 Other intangible assets: Core deposit intangibles $ 38,356 $ 12 $ 38,356 $ ( 3,428 ) $ 34,940 Relationship based intangibles 19,650 15,229 — ( 5,940 ) 13,710 Tradename 818 818 — ( 91 ) 727 Non-compete 903 903 — ( 451 ) 452 Total $ 16,962 $ 38,356 $ ( 9,910 ) $ 49,829 December 31, 2021 Goodwill (1) $ 26,741 $ 7,412 N/A $ 34,153 Other intangible assets: Core deposit intangibles 1,260 $ 1,260 $ — $ ( 1,248 ) $ 12 Relationship based intangibles 19,650 7,304 12,346 ( 4,421 ) 15,229 Tradename 1,004 186 818 ( 186 ) 818 Non-compete 903 — 903 — 903 Total $ 8,750 $ 14,067 $ ( 5,855 ) $ 16,962 ___________________________ (1) A downward adjustment of $ 215,000 to the preliminary goodwill estimate was recorded in conjunction with the accounting of the acquisitions of the Lincoln Agency and Pulley-White subsequent to December 31, 2021, and is reflected in the goodwill amount in the above schedule. Core deposit intangibles acquired during the year ended December 31, 2022, represent the value of the relationships that BTH had with their deposit customers and are amortized over 10 years using an accelerated amortization methodology. Amortization expense on other intangible assets totaled $ 5.5 million, $ 844,000 and $ 1.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, and was included as a component of other noninterest expense in the consolidated statements of income. Estimated future amortization expense for intangible assets remaining at December 31, 2022, was as follows: (Dollars in thousands) Years Ended December 31, 2023 $ 9,500 2024 7,676 2025 6,383 2026 5,335 2027 4,454 Thereafter 16,481 Total $ 49,829 124 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 10 - Mortgage Banking The following table presents the Company's revenue from mortgage banking operations: (Dollars in thousands) Year Ended December 31, Mortgage banking revenue 2022 2021 2020 Origination $ 774 $ 1,379 $ 1,880 Gain (loss) on sale of loans held for sale 4,889 11,862 13,481 Originations of MSRs 2,286 5,153 5,709 Servicing 5,643 5,990 6,116 Total gross mortgage revenue 13,592 24,384 27,186 MSR valuation adjustments, net 1,219 ( 2,593 ) ( 12,746 ) Mortgage HFS and pipeline fair value adjustment ( 1,352 ) ( 6,897 ) 7,351 MSR hedge impact ( 6,737 ) ( 1,967 ) 7,812 Mortgage banking revenue (loss) $ 6,722 $ 12,927 $ 29,603 Management uses TBA mortgage-backed securities and U.S. Treasury futures to mitigate the impact of changes in fair value of MSRs. See Note 13 - Derivative Financial Instruments for further information. Mortgage Servicing Rights Activity in MSRs was as follows: Year Ended December 31, (Dollars in thousands) 2022 2021 2020 Balance at beginning of period $ 16,220 $ 13,660 $ 20,697 Servicing acquired in BTH merger 1,099 — — Addition of servicing rights 2,286 5,153 5,709 Valuation adjustment, net of amortization 1,219 ( 2,593 ) ( 12,746 ) Balance at end of period $ 20,824 $ 16,220 $ 13,660 During the second half of 2022, the Company recognized an impairment of $ 2.0 million and entered into an agreement to sell its GNMA MSR portfolio, which met all final sale conditions in early 2023. The Company sold approximately $ 1.8 million in GNMA MSR, with no significant additional gain or loss realized, and derecognized the related GNMA repurchase asset and offsetting liability of $ 24.6 million in the first quarter of 2023. The Company receives annual servicing fee income approximating 0.28 % of the outstanding balance of the underlying loans. In connection with the Company's activities as a servicer of mortgage loans, the investors and the securitization trusts have no recourse to the Company's assets for failure of debtors to pay when due. The Company is potentially subject to losses in its loan servicing portfolio due to loan foreclosures. The Company has obligations to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loan sold violated representations or warranties made by the Company and/or the borrower at the time of the sale, which the Company refers to as mortgage loan servicing putback expenses. Such representations and warranties typically include those made regarding loans that had missing or insufficient file documentation and/or loans obtained through fraud by borrowers or other third parties. Putback claims may be made until the loan is paid in full. When a putback claim is received, the Company evaluates the claim and takes appropriate actions based on the nature of the claim. The Company is required by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation to provide a response to putback claims within 60 of the date of receipt. At December 31, 2022 and 2021, the reserve for mortgage loan servicing putback expenses totaled $ 217,000 and $ 379,000 , respectively. There is inherent uncertainty in reasonably estimating the requirement for reserves against future mortgage loan servicing putback expenses. Future putback expenses depend on many subjective factors, including the review procedures of the purchasers and the potential refinance activity on loans sold with servicing released and the subsequent consequences under the representations and warranties. 125 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer's option, and without GNMA's prior authorization, the servicer may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When a financial institution is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be included in the consolidated balance sheets as mortgage loans held for sale, regardless of whether the institution intends to exercise the buy-back option. These loans totaled $ 24.6 million and $ 43.4 million at December 31, 2022 and 2021, respectively, and were recorded as mortgage loans held for sale at the lower of cost or fair value with a corresponding liability in FHLB advances and other borrowings on the Company's consolidated balance sheets. As mentioned above, the Company sold approximately $ 1.8 million in GNMA MSR and derecognized the related GNMA repurchase asset and offsetting liability of $ 24.6 million during the first quarter of 2023. Note 11 - Deposits Deposit balances are summarized as follows: December 31, (Dollars in thousands) 2022 2021 Noninterest-bearing demand $ 2,482,475 $ 2,163,507 Money market 2,442,559 2,204,109 Interest bearing demand 1,737,158 1,412,089 Time deposits 787,287 543,128 Savings 326,223 247,860 Total $ 7,775,702 $ 6,570,693 Municipal deposits totaled $ 794.6 million and $ 814.8 million at December 31, 2022 and 2021, respectively. Included in time deposits at December 31, 2022 and 2021, are $ 322.2 million and $ 222.7 million, respectively, of time deposits in denominations of $250,000 or more. Maturities of time deposits, at December 31, 2022, are as follows: (Dollars in thousands) Years Ended December 31, 2023 $ 539,763 2024 212,316 2025 18,799 2026 6,321 2027 9,860 2028 228 Total $ 787,287 At December 31, 2022 and 2021, overdrawn deposits of $ 1.3 million and $ 1.9 million, respectively, were reclassified as unsecured loans. 126 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 12 - Borrowings Borrowed funds are summarized as follows: December 31, (Dollars in thousands) 2022 2021 Short-term FHLB advances $ 550,000 $ — Long-term FHLB advances 6,740 256,999 GNMA repurchase liability 24,569 43,355 Overnight repurchase agreements with depositors 27,921 9,447 Correspondent short-term borrowings 30,000 — Total FHLB advances and other borrowings $ 639,230 $ 309,801 Subordinated indebtedness, net $ 201,765 $ 157,417 Additional details of certain FHLB advances are as follows: (Dollars in thousands) Amount Interest Rate Maturity Date At December 31, 2022: Short-term FHLB advance, fixed rate $ 450,000 4.55 % 1/3/2023 Short-term FHLB advance, fixed rate 100,000 4.62 1/13/2023 At December 31, 2021: Long-term FHLB advance, callable quarterly, fixed rate 250,000 1.65 8/23/2033 Security for all indebtedness and outstanding commitments to the FHLB consists of a blanket floating lien on all of the Company's first mortgage loans, commercial real estate and other real estate loans, as well as the Company's investment in capital stock of the FHLB and deposit accounts at the FHLB. The net amounts available under the blanket floating lien at December 31, 2022 and 2021, were $ 1.29 billion and $ 982.2 million, respectively. Long-Term Borrowings Interest rates for FHLB long-term advances outstanding at December 31, 2022, ranged from 1.99 % to 4.57 %. Interest rates for FHLB long-term advances outstanding at December 31, 2021, ranged from 1.65 % to 4.57 %. These advances are all fixed rate and are subject to restrictions or penalties in the event of prepayment. Scheduled maturities of long-term advances from the FHLB at December 31, 2022, are as follows: (Dollars in thousands) Years Ended December 31, 2026 $ 483 2027 1,376 Thereafter 4,881 Total $ 6,740 Short-Term Borrowings In conjunction with the BTH merger, the Company assumed certain repurchase agreements with former BTH depositors that included the sale and repurchase of BTH investment securities of at least equal to the daily balance of the BTH depositor's account, subject to maximum limitations, with various maturity dates. These BTH repurchase agreements were restructured and integrated into the Company's repurchase agreements which include the sale and repurchase of investment securities and mature on a daily basis. The total overnight repurchase agreements with depositors carried a daily average interest rate of 0.24 % for the year ended December 31, 2022, and 0.08 % for the year ended December 31, 2021, rated into the Company's repurchase agreements which include the sale and repurchase of investment securities and mature on a daily basis. 127 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The Company had unsecured lines of credit for the purchase of federal funds in the amount of $ 140.0 million at both December 31, 2022 and 2021. The Company also had a $ 75.0 million secured repurchase line of credit at December 31, 2022 and 2021. There were no amounts outstanding on these lines at either date. It is customary for the financial institutions granting the unsecured lines of credit to require a minimum amount of cash be held on deposit at that institution. Amounts required to be held on deposit are typically $ 250,000 or less, and the Company has complied with all compensating balance requirements to allow utilization of these lines of credit. Additionally, at December 31, 2022 and 2021, the Company had the availability to borrow $ 1.23 billion and $ 856.8 million, respectively, from the discount window at the Federal Reserve Bank of Dallas, with $ 1.76 billion and $ 1.09 billion in commercial and industrial loans pledged as collateral, respectively. There were no borrowings against this line at December 31, 2022 or 2021. Holding Company Line of Credit On October 5, 2018, the Company entered into a Loan Agreement (the "Loan Agreement"), along with certain ancillary instruments, with NexBank SSB ("Lender") pursuant to which the Lender would make one or more revolving credit loans of up to $ 50 million to the Company, maturing October 5, 2021, which the Company could use for working capital and general corporate purposes. On October 5, 2021, the Company entered into a first amendment to the Loan Agreement extending the maturity to November 5, 2021. On October 29, 2021, the Company entered into a second amendment (the "Amendment") to the Loan Agreement. Pursuant to the Amendment, the loan may not exceed an aggregate principal amount of $ 100 million, consisting of the $ 50 million existing loan amount and any one or more potential incremental revolving loan commitments that the Lender may make in its sole discretion, up to an aggregate principal of $ 50 million, upon the request of the Company. The Lender has no obligation to agree to extend any incremental revolving loan or to increase the loan amount. The principal amounts borrowed under the Loan Agreement bear interest at a variable rate equal to the applicable Term SOFR for the then-current SOFR Interest Period plus 3.35 % (as such terms are defined in the Loan Agreement). Pursuant to the Amendment, the line of credit available to the Company expired on October 28, 2022, or such date of the acceleration of the obligation pursuant to the Loan Agreement, as amended, at which time all amounts borrowed, together with applicable interest, fees and other amounts owed by the Company shall be due and payable. The Company may extend the maturity date to a date that is three hundred and sixty-four ( 364 ) days after the then-effective maturity date, no more than two times upon (i) delivery of a written request therefor to Lender at least thirty (30) days, but no more than (60) days, prior to the maturity date then in effect; and (ii) receipt by the Lender of a certificate of the Company dated the date of such request. The Company exercised the request for extension and the maturity date was extended to October 27, 2023. The Company had $ 30.0 million and zero outstanding on this revolving credit loan under the Loan Agreement at December 31, 2022 and 2021, respectively. 128 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Subordinated Indebtedness As detailed in the table below and included in subordinated indebtedness, net in the table above, on August 1, 2022, the Company assumed $ 37.6 million of subordinated promissory notes ("BTH Notes") from BTH. Debt Security Issue Year Interest Rate Outstanding Amount (Dollars in thousands) Floating rate subordinated promissory notes due June 2025 2015 Prime + 175 bps Min: 3.875 % Max: 6.375 % $ 5,500 Floating rate subordinated promissory notes due December 2023 2016 Prime + 125 bps Min: 3.875 % Max: 6.375 % 3,000 Floating rate subordinated promissory notes due December 2026 2016 Prime + 175 bps Min: 3.875 % Max: 6.375 % 6,750 Floating rate subordinated promissory notes due December 2024 2017 Prime + 125 bps Min: 3.875 % Max: 6.375 % 11,100 Floating rate subordinated promissory notes due December 2027 2017 Prime + 175 bps Min: 3.875 % Max: 6.375 % 5,200 Floating rate subordinated promissory notes due December 2025 2018 Prime + 50 bps Min: 3.875 % Max: 6.125 % 3,200 Floating rate subordinated promissory notes due December 2028 2018 Prime + 75 bps Min: 3.875 % Max: 6.125 % 1,900 Fixed to floating rate subordinated promissory notes due June 2031 2021 Through 6/30/26: 4.00 % After 6/30/26: Prime + 75 bps Min: 3.875 % Max: 6.125 % 1,000 Fair value adjustment at December 31, 2022 ( 47 ) Total assumed subordinated notes at December 31, 2022 37,603 Legacy subordinated indebtedness described below 147,894 Total subordinated indebtedness, excluding junior subordinated debt $ 185,497 129 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The BTH Notes are intended to qualify for Tier 2 capital treatment and are substantively identical in terms and conditions, including priority, except for the maturity dates and interest rates payable on the notes. Interest is payable on the BTH Notes quarterly, and the principal amount of each BTH Note is payable at maturity. After the five-year anniversary of issuance, the Company can 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. In addition, the BTH Notes can be redeemed at any time without penalty, upon not less than ten days ’ notice, in the event that (i) the BTH Notes no longer qualify as Tier 2 capital as a result of any amendment or change in interpretation or application of laws or regulation that becomes effective after the date of issuance of the BTH Notes, or (ii) a tax event, or (iii) investment company act event, as defined in the BTH Notes. The BTH Notes are unsecured and rank senior to the Company’s common stock, any preferred stock that may be issued, and the BTH TruPS (defined below). 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 initially bear 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 will equal the three-month LIBOR rate (provided, that in the event the three-month LIBOR is less than zero, the three-month LIBOR will be deemed to be zero) plus 282 basis points, payable quarterly in arrears, subject to customary fallback provision upon the discontinuation of LIBOR. Origin Bank is entitled to redeem the 4.25 % Notes, in whole or in part, on or after February 15, 2025, and to redeem the 4.25 % Notes at any time in whole upon certain other specified events. The 4.25 % Notes qualify as Tier 2 capital for regulatory capital purposes for Origin Bank. 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 was transferred to Origin Bank, which qualifies as Tier 1 capital for regulatory capital purposes for the Bank. The balance of the subordinated indebtedness varies from the amounts carried on the consolidated balance sheets due to the remaining purchase discount of $ 3.2 million and $ 3.4 million, at December 31, 2022 and 2021, respectively, which was established at the time of issuance and is being amortized over the remaining life of the securities using the interest method. On August 1, 2022, the Company assumed BTH's obligations with respect to $ 7.2 million in aggregate principal amount of junior subordinated debentures issued to a statutory trust of BTH ("BTH TruPS"). The BTH TruPS and the Company's two other wholly-owned, unconsolidated subsidiary grantor trusts were established for the purpose of issuing trust preferred securities. The trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in each trust agreement. The trusts used the net proceeds from each of the offerings to purchase a like amount of junior subordinated debentures (the "debentures") of the Company. The debentures are the sole assets of the trusts. The Company's obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon maturity of the debentures and can be currently redeemed by the Company in whole or in part at a redemption price equal to 100 % of the outstanding principal amount of the debentures, plus any accrued but unpaid interest to the redemption date. The trust preferred securities qualify as Tier 1 capital of the Company for regulatory purposes, subject to certain limitations. 130 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The following table is a summary of the terms of the current junior subordinated debentures at December 31, 2022: (Dollars in thousands) Issuance Trust Issuance Date Maturity Date Amount Outstanding Rate Type Current Rate Maximum Rate CTB Statutory Trust I 07/2001 07/2031 $ 6,702 Variable (1) 7.71 % 12.50 % First Louisiana Statutory Trust I 09/2006 12/2036 4,124 Variable (2) 6.57 16.00 BT Holdings Trust I 05/2007 09/2037 7,217 Variable (3) 6.37 N/A Par amount $ 18,043 Unamortized original issue discount ( 1,055 ) Unamortized purchase accounting discount ( 720 ) Total junior subordinated debt at December 31, 2022 $ 16,268 ____________________________ (1) The trust preferred securities reprice quarterly based on the three-month LIBOR plus 3.30 %, with the last reprice date on October 27, 2022. (2) The trust preferred securities reprice quarterly based on the three-month LIBOR plus 1.80 %, with the last reprice date on December 13, 2022. (3) The trust preferred securities reprice quarterly based on the three-month LIBOR plus 1.64 % with the last reprice date on December 2, 2022. Note 13 - Derivative Financial Instruments Risk Management Objective of Using Derivatives The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company's known or expected cash receipts and its known or expected cash payments, as well as to manage changes in fair values of some assets which are marked at fair value through the consolidated statement of income on a recurring basis. Cash Flow Hedges of Interest Rate Risk The Company is a party to interest rate swap agreements under which the Company receives interest at a variable rate and pays at a fixed rate. The derivative instruments represented by these swap agreements are designated as cash flow hedges of the Company's forecasted variable cash flows under a variable-rate term borrowing agreements. During the terms of the swap agreements, the effective portion of changes in the fair value of the derivative instruments are recorded in accumulated other comprehensive (loss) income and subsequently reclassified into earnings in the periods that the hedged forecasted variable-rate interest payments affected earnings. There was no ineffective portion of the change in fair value of the derivatives recognized directly in earnings. The entire swap fair value will be reclassified into earnings before the expiration dates of the swap agreements. Derivatives Not Designated as Hedges Customer interest rate derivative program The Company offers certain derivatives products, primarily interest rate swaps, directly to qualified commercial banking customers to facilitate their risk management strategies. In most instances, the Company acts only as an intermediary, simultaneously entering into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions without significantly impacting its results of operations. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and any offsetting derivatives are recognized directly in earnings as a component of noninterest income. From time to time, the Company shares in credit risk on interest rate swap arrangements, by entering into risk participation agreements with syndication partners. These are accounted for at fair value and disclosed as risk participation derivatives. Mortgage banking derivatives The Company enters into certain derivative agreements as part of its mortgage banking and related risk management activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a mandatory delivery basis. The Company also economically hedges the value of MSRs by entering into a series of commitments to purchase mortgage-backed securities in the future and U.S. Treasury future contracts. 131 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Fair Values of Derivative Instruments on the Consolidated Balance Sheets The following tables disclose the fair value of derivative instruments in the Company's consolidated balance sheets at December 31, 2022 and 2021, as well as the effect of these derivative instruments on the Company's consolidated statements of income for the year ended December 31, 2022 and 2021. Derivative instruments and their related gains and losses are reported in other operating activities, net in the statements of cash flows. Notional Amounts (1) Fair Values (Dollars in thousands) Derivatives designated as cash flow hedging instruments: December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Interest rate swaps included in other assets $ 10,500 $ 21,000 $ 1,043 $ ( 103 ) Derivatives not designated as hedging instruments: Interest rate swaps included in other assets $ 352,842 $ 315,188 $ 25,482 $ 10,417 Interest rate swaps included in other liabilities 345,742 327,510 ( 25,175 ) ( 10,762 ) Risk participation agreements included in accrued expenses and other liabilities on the consolidated balance sheets 59,738 63,374 — ( 2 ) Forward commitments to purchase TBA mortgage-backed securities included in other liabilities 7,000 80,000 ( 100 ) ( 627 ) Forward commitments to purchase treasury notes in other assets 31,500 — — — Forward commitments to sell residential mortgage loans included in other assets 8,500 52,000 7 1 Interest rate-lock commitments on residential mortgage loans included in other assets 9,544 36,694 201 1,041 $ 814,866 $ 874,766 $ 415 $ 68 ____________________________ (1) Notional or contractual amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the consolidated balance sheets. The weighted-average rates paid and received for interest rate swaps at December 31, 2022, were as follows: Weighted-Average Interest Rate December 31, 2022 December 31, 2021 Interest rate swaps: Paid Received Paid Received Cash flow hedges 4.98 % 5.72 % 4.81 % 2.89 % Non-hedging interest rate swaps - financial institution counterparties 3.72 5.75 4.32 2.68 Non-hedging interest rate swaps - customer counterparties 5.75 3.72 2.68 4.33 Gains and losses recognized on derivative instruments not designated as hedging instruments are as follows: (Dollars in thousands) Years Ended December 31, Derivatives not designated as hedging instruments: 2022 2021 2020 Amount of (loss) gain recognized in mortgage banking revenue (1) $ ( 2,813 ) $ ( 3,118 ) $ 4,081 Amount of gain (loss) recognized in other non-interest income 655 816 ( 307 ) ____________________________ (1) Gains and losses on these instruments are largely offset by market fluctuations in mortgage servicing rights. See Note 10 - Mortgage Banking for more information on components of mortgage banking revenue. Some interest rate swaps included in other assets were subject to a master netting arrangement with the counterparty in all periods presented and could be offset against some amounts included in interest rate swaps included in other liabilities. The Company has chosen not to net these exposures in the consolidated balance sheets, and any impact of netting these amounts would not be significant. 132 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements At December 31, 2022 and 2021, the Company had cash collateral on deposit with swap counterparties totaling $ 7.6 million and $ 16.5 million, respectively. These amounts are included in interest-bearing deposits in banks in the consolidated balance sheets and are considered restricted cash until such time as the underlying swaps are settled. Note 14 - Stock and Incentive Compensation Plans The Company has granted, and currently has outstanding, stock and incentive compensation awards subject to the provisions of the Company's 2012 Stock Incentive Plan (the "2012 Plan"). The 2012 Plan is designed to provide flexibility to the Company regarding its ability to motivate, attract and retain the services of key officers, employees and directors. The 2012 Plan allows the Company to make grants of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards ("RSA"), restricted stock units ("RSU"), dividend equivalent rights, performance stock units ("PSU") or any combination thereof. At December 31, 2022, the maximum number of shares of the Company's common stock available for issuance under the 2012 Plan was 194,020 shares. Additionally, in April 2021, an employee stock purchase plan ("ESPP") was approved by the Company's stockholders and qualified as an ESPP under IRS guidelines. The ESPP provides for the purchase of up to an aggregate one million shares of the Company's common stock by employees, and the total number of shares available for issuance at December 31, 2022, was 973,911 . Under the ESPP, employees of the Company, who elect to participate, have the right to purchase a limited number of shares of the Company's common stock at a 15 % discount from the lower of the market value of the common stock at the beginning or the end of each one year offering period, beginning on June 1st. The ESPP benefit is treated as compensation to the employee, and the compensation expense will be recognized over the service period based on the fair value of the rights on the grant date, adjusted for forfeitures and certain modifications. Under the ESPP, employees purchased 26,089 shares during the year ended December 31, 2022, and no shares of common stock were issued pursuant to the ESPP during the year ended December 31, 2021. In February 2022, the Compensation Committee ("Committee") approved and the Company granted PSUs to select officers and employees under the 2012 Plan. Each PSU represents a right for the participant to receive shares of Company common stock or cash equal to the fair market value of such stock, as determined by the Committee. The number of PSUs to which the participant may be entitled will vary from 0 % to 150 % of the target number of PSUs, based on the Company’s achievement of specified performance criteria during the performance period compared to performance benchmarks adopted by the Committee and, further, the participant's continuous service with the Company through the third anniversary of the date of the grant. The performance period is the three-year period commencing on January 1, 2022, and ending on December 31, 2024 ("Performance Period"). On December 7, 2022, the Committee and the independent members of the Board also approved a special, one-time stock award to Drake Mills, the Company’s President and Chief Executive Officer (the “One-Time Award”), having an approximate value of $ 10,000,000 , was comprised of 129,736 restricted stock units (“CEO RSUs”) and 129,735 market-based performance stock units (“CEO PSUs”), and was effective as of December 13, 2022, (the “Grant Date”). In exchange for the One-Time Award, Mr. Mills agreed to a 2-year non-competition covenant, in addition to the standard non-solicitation of customers and employees covenant included in the Company’s form of award agreement. Pursuant to the One-Time Award, the CEO RSUs shall vest in five approximately equal installments on each of the third, fourth, fifth, sixth and seventh anniversaries of the Grant Date, subject to Mr. Mills’ continued employment with the Company on each respective vesting date, or upon the earlier occurrence of Mr. Mills’ death, disability, termination of employment without cause or resignation for good reason. The CEO PSUs shall be eligible to vest based on achievement of five pre-established stock price hurdles (each, a “Stock Price Hurdle”) during a seven-year performance period (the “CEO Performance Period”). Achievement of each Stock Price Hurdle requires substantial and sustained growth in the Company’s stock price, with each Stock Price Hurdle representing a twenty percent ( 20 %) price appreciation over the 20-day average closing price of the Company’s common stock as of the Grant Date (such that 100 % appreciation is required for 100 % of the CEO PSUs to vest). Each Stock Price Hurdle must be maintained for twenty consecutive days during the CEO Performance Period. Each of the five tranches of CEO PSUs will vest on the later of the date that the applicable Stock Price Hurdle is achieved (“Achieved PSUs”) or the third, fourth, fifth, sixth and seventh anniversaries of the Grant Date, respectively, subject to Mr. Mills’ continued employment with the Company on each respective vesting date, or upon the earlier occurrence of Mr. Mills’ death or disability. If Mr. Mills’ employment is terminated without cause or he resigns for good reason, then any Achieved PSUs will become fully vested and unearned CEO PSUs will remain outstanding and eligible to vest based on achievement of the Stock Price Hurdle during the CEO Performance Period. The One-Time Award was granted pursuant to, and subject to the terms and conditions of, the Origin Bancorp, Inc. 2012 Stock Incentive Plan and the Company’s form of RSU agreement and PSU agreement, respectively. 133 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Compensation expense for the CEO PSUs will be recognized over the vesting period of the awards based on the fair value of the award at the grant date determined by using a Monte Carlo simulation model with the following inputs: Simulation Inputs Year Ended December 31, 2022 Grant date December 13, 2022 Performance period seven years Stock price $ 36.87 Expected volatility (1) 33.0 % Risk-free rate (2) 3.5 ____________________________ (1) The expected volatility was determined based on the historical volatilities of the Company and the specified peer group. (2) The risk-free interest rate for the performance period was derived from the seven-year continuous U.S. Treasury Yield constant maturity curve on the valuation date. Share-based compensation cost charged to income for the years ended December 31, 2022, 2021, and 2020 is presented below. There was no stock option expense for any of the periods shown. Year Ended December 31, (Dollars in thousands) 2022 2021 2020 RSA & RSU $ 2,845 $ 2,100 $ 2,320 PSU 288 — — ESPP 316 195 — Total stock compensation expense $ 3,449 $ 2,295 $ 2,320 Related tax benefits recognized in net income $ 724 $ 482 $ 487 Restricted Stock and Performance Stock Grants The Company's RSAs and RSUs are time-vested awards and are granted to the Company's Board of Directors, executives and senior management team. The service period in which time-vested awards are earned ranges from one to seven years . Time-vested awards are valued utilizing the fair value of the Company's stock at the grant date. These awards are recognized on the straight-line method over the requisite service period, with forfeitures recognized as they occur. The Company's PSU awards, excluding the CEO PSUs, are three-year cliff-vested awards, with each unit divided into two categories ("ROAA Unit Group" and "ROAE Unit Group"), composed of an equivalent number of initial PSUs granted. The PSUs do not reflect potential increases or decreases resulting from the interim performance results until the final performance results are determined at the end of the three-year period. The ROAA Unit Group is based upon the Company's Performance Period Return on Average Assets performance, and the ROAE Unit Group is based upon the Company's Performance Period Return on Average Equity performance. The PSUs are initially valued utilizing the fair value of the Company's stock at the grant date, assuming 100 % of the target number of units are achieved. Subsequent valuation of the PSUs is determined using the ratio of the actual Company's Performance Period ROAA or ROAE to the Company's targeted Performance Period ROAA or ROAE, applied to the PSUs awarded times the Company's period end stock price. Forfeitures are recognized as they occur. 134 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The following table summarizes the Company's award activity: Year Ended December 31, 2022 2021 2020 Shares Weighted Average Grant-Date Fair Value Shares Weighted Average Grant-Date Fair Value Shares Weighted Average Grant-Date Fair Value Nonvested RSA shares, January 1, 48,048 $ 35.27 103,359 $ 31.51 149,449 $ 35.15 Granted RSA 12,840 37.39 13,460 42.26 30,638 20.14 Vested RSA ( 33,497 ) 36.00 ( 67,825 ) 31.07 ( 72,325 ) 33.88 Forfeited RSA — — ( 946 ) 24.69 ( 4,403 ) 37.11 Nonvested RSA shares, December 31, 27,391 35.37 48,048 35.27 103,359 31.51 Nonvested RSU, January 1, 73,977 $ 40.64 — $ — — $ — Granted RSU 222,282 39.43 73,977 40.64 — — Vested RSU ( 24,028 ) 40.56 — — — — Forfeited RSU ( 1,841 ) 43.48 — — — — Nonvested RSU, December 31, 270,390 39.63 73,977 40.64 — — Nonvested PSU, January 1, — $ — — $ — — $ — Granted PSU 157,367 29.06 — — — — Adjustment due to performance — — — — — — Nonvested PSU, December 31, 157,367 29.06 — — — — At December 31, 2022, there was $ 518,000 , $ 9.6 million and $ 4.0 million of total unrecognized compensation cost related to nonvested RSA shares, RSU shares and PSU shares under the 2012 Plan, respectively. Those costs are expected to be recognized over a weighted-average period of 0.6 , 4.6 and 2.8 years for RSA, RSU and PSU shares, respectively. Stock Option Grants The Company has previously issued common stock options to select officers and employees primarily through individual agreements. The exercise price of each option varies by agreement and is based on the fair value of the stock at the date of the grant. No outstanding stock option has a term that exceeds twenty years , and all of the outstanding options are fully vested. The Company recognized compensation cost for stock option grants over the required service period based upon the grant date fair value, which is established using a Black-Scholes valuation model. The Black-Scholes valuation model uses assumptions of risk-free interest rate, expected term of stock options, expected stock price volatility and expected dividends. Forfeitures are recognized as they occur. In conjunction with the BTH merger, the Company assumed the BTH 2012 Equity Incentive Plan and converted all outstanding options to purchase BTH common stock into options to purchase an aggregate of 611,676 shares of the Company's common stock. Under the terms of applicable change in control provisions within the BTH 2012 Equity Incentive Plan and BTH Notice Of Stock Option Award, all BTH stock options fully vested immediately prior to the closing of the merger that occurred on August 1, 2022. BTH converted options have no expiration dates past August 16, 2031, and no further grants will be made under the BTH 2012 Equity Incentive Plan. 135 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The table below summarizes the status of the Company's stock options and changes during the years ended December 31, 2022, 2021, and 2020. (Dollars in thousands, except per share amounts) Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Year Ended December 31, 2022 Outstanding at January 1, 2022 39,200 $ 10.73 2.28 $ 1,262 BTH options converted to OBNK options 611,676 28.62 — 8,838 Exercised ( 144,785 ) 20.80 — 2,992 Expired ( 1,654 ) 34.44 — — Outstanding and exercisable at December 31, 2022 504,437 29.46 5.13 3,736 Year Ended December 31, 2021 Outstanding at January 1, 2021 224,000 10.86 4.92 3,789 Exercised ( 184,800 ) 10.88 — 6,447 Outstanding and exercisable at December 31, 2021 39,200 10.73 2.28 1,262 Year Ended December 31, 2020 Outstanding at January 1, 2020 254,000 10.55 5.81 6,932 Exercised ( 30,000 ) 8.25 — 866 Outstanding and exercisable at December 31, 2020 224,000 10.86 4.92 3,789 Note 15 - Employee Benefit Plans Defined Contribution Retirement Plan The Company maintains the Origin Bancorp, Inc. Employee Retirement Plan (the "Retirement Plan") that is a defined contribution benefit plan, that allows contributions under section 401(k) of the Internal Revenue Code. The Retirement Plan covers substantially all employees who meet certain other requirements and employment classification criteria. Under the provisions of the Retirement Plan, the Company may make discretionary matching contributions on a percentage, not to exceed 6 %, of a participant's elective deferrals. Any percentage(s) determined by the Company shall apply to all eligible persons for the entire plan year. Historically, the Company has matched 50 % of the first 6 % of eligible compensation deferred by a participant. Eligible compensation includes salaries, wages, overtime and bonuses, and excludes expense reimbursements and fringe benefits. In addition, the Company may make additional discretionary contributions out of current or accumulated net profit. Matching contributions are invested as directed by the participant. The total of the Company's contributions may not exceed limitations set forth in the Retirement Plan document or the maximum deductible under the Internal Revenue Code. Although it has not expressed any intention to do so, the Company has the right to terminate the Retirement Plan at any time. The total expense related to the Retirement Plan, including optional contributions, was $ 2.4 million, $ 2.1 million and $ 2.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. 136 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Other Benefit Plans The Company has entered into individual Supplemental Executive Retirement Plans (“SERP”) or Executive Supplemental Income Agreements (“ESIA”) with several of its executive officers. Eligibility to participate in a SERP or ESIA is limited to senior officers and determined by the Board. The SERPs and ESIA are unfunded and designed to be a nonqualified deferred compensation retirement plan in compliance with Section 409A of the Internal Revenue Code. Deferred compensation has been recorded for these plans as a component of accrued expenses and other liabilities in the accompanying consolidated balance sheets. The deferred compensation liability was $ 10.9 million and $ 10.4 million at December 31, 2022 and 2021, respectively. Typically, payments to participants reduce the accrual and any actuarial adjustments are netted with the expense. The expense recorded for the deferred compensation plan totaled $ 1.1 million, $ 1.1 million, and $ 1.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. On December 7, 2022, the Company's Board of Directors approved the Origin Bank Nonqualified Deferred Compensation Plan (the “DCP”), pursuant to which certain employees, including the Company’s named executive officers, may elect to participate. Pursuant to the DCP, which became effective January 1, 2023, participants may make deferral elections with respect to their base salary, bonus or stock units. The Company may make discretionary contributions to the DCP, which contributions will be subject to a vesting schedule. Unless otherwise specified by the Company, such Company contributions will have a 5-year ratable vesting schedule, subject to acceleration of vesting in the case of a change in control or the participant’s death, disability or retirement. Participants may make individual investment elections that will determine the rate of return on their cash deferral amounts under the DCP. Cash deferrals are only deemed to be invested in the investment options selected. The DCP does not provide any above-market returns or preferential earnings to participants, and, with the exception of Company contributions, the deferrals and their earnings are always 100 % vested. Participants may elect at the time they make their deferral elections to receive in-service and/or separation from service distributions, either as a lump sum payment or in substantially equal annual installments over a period of 5 years or 10 years, respectively. There was no deferred compensation liability or expense recorded pursuant to the DCP plan during the periods covered by this report. Note 16 - Income Taxes The provision for income taxes is as follows: (Dollars in thousands) Year Ended December 31, Federal income taxes: 2022 2021 2020 Current $ 1,378 $ 17,022 $ 18,157 Deferred 18,634 6,077 ( 11,545 ) State income taxes: Current 40 584 1,723 Deferred ( 325 ) 202 ( 339 ) Income tax expense $ 19,727 $ 23,885 $ 7,996 137 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is below: Year Ended December 31, 2022 2021 2020 (Dollars in thousands) Amount % Amount % Amount % Income taxes computed at statutory rate $ 22,563 21.00 % $ 27,811 21.00 % $ 9,314 21.00 % Tax exempt revenue, net of nondeductible interest ( 1,510 ) ( 1.41 ) ( 1,339 ) ( 1.01 ) ( 878 ) ( 1.98 ) Low-income housing tax credits, net of amortization ( 832 ) ( 0.77 ) ( 468 ) ( 0.35 ) ( 511 ) ( 1.15 ) Other tax credits, net of add-backs ( 1,218 ) ( 1.13 ) ( 1,218 ) ( 0.92 ) ( 1,218 ) ( 2.75 ) Bank-owned life insurance income ( 145 ) ( 0.13 ) ( 170 ) ( 0.13 ) ( 259 ) ( 0.58 ) State income taxes, net of federal benefit ( 201 ) ( 0.19 ) 662 0.50 1,033 2.35 Stock-based compensation 17 0.02 ( 1,272 ) ( 0.96 ) 181 0.41 Nondeductible expense 996 0.93 106 0.08 257 0.58 Other 57 0.04 ( 227 ) ( 0.17 ) 77 0.16 Total income tax expense $ 19,727 18.36 % $ 23,885 18.04 % $ 7,996 18.04 % Significant components of deferred tax assets and liabilities are as follows: (Dollars in thousands) December 31, Deferred tax assets: 2022 2021 Credit loss allowances $ 20,480 $ 14,565 Deferred compensation and share-based compensation 7,699 4,795 Net operating loss carryforwards 27,341 1,170 Credit carryforwards 3,678 — Other 45 278 Investments in limited partnerships 13 — Other real estate owned 9 — Lease obligations 36 — Premium/discount on acquisitions 624 — Deferred rent obligations 594 — Gross deferred tax assets 60,519 20,808 Valuation allowance ( 899 ) ( 974 ) Deferred tax assets net of valuation allowance $ 59,620 $ 19,834 Deferred tax liabilities: Basis difference in premises and equipment $ 3,811 $ 2,461 Intangible assets 8,539 127 Mortgage servicing rights 4,499 3,504 Other 341 1,144 Gross deferred tax liabilities 17,190 7,236 Net deferred tax asset $ 42,430 $ 12,598 At December 31, 2022, the Company had $ 126.5 million of Federal gross net operating net loss carryforwards and $ 22.8 million in gross state net operating losses carryforwards. Of these net loss carryforwards, $ 3.1 million in Federal gross net operating loss carryforwards acquired in previous business combinations are expiring between 2023 and 2028, and 65.4 % of the $ 22.8 million in state net operating losses can be carried forward indefinitely with the remaining carryforwards expiring between 2028 and 2042. Due to limitations on the amounts of these losses that can be recognized annually, the Company has determined that it is more likely than not that some of these net operating loss carryforwards will expire unused, and has established a $ 899,000 valuation allowance related to these carryforwards. 138 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The Company files a consolidated income tax return in the U.S. federal jurisdiction and various states. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities in these taxing jurisdictions for the years before 2019. Note 17 - Accumulated Other Comprehensive (Loss) Income Accumulated other comprehensive income (loss) income ("AOCI") includes the after-tax change in unrealized gains and losses on AFS securities and cash flow hedging activities. (Dollars in thousands) Unrealized (Loss) Gain on AFS Securities Unrealized Gain (Loss) on Cash Flow Hedges Accumulated Other Comprehensive (Loss) Income Balance at January 1, 2020 $ 6,412 $ ( 79 ) $ 6,333 Net change 19,794 ( 478 ) 19,316 Balance at December 31, 2020 26,206 ( 557 ) 25,649 Net change ( 20,397 ) 477 ( 19,920 ) Balance at December 31, 2021 5,809 ( 80 ) 5,729 Net change ( 166,509 ) 905 ( 165,604 ) Balance at December 31, 2022 $ ( 160,700 ) $ 825 $ ( 159,875 ) Note 18 - Capital and Regulatory Matters The Company (on a consolidated basis) and the Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The Company is subject to the Basel III regulatory capital framework ("Basel III Capital Rules"), which includes a 2.5% capital conservation buffer. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and other payments. Failure to meet the full amount of the buffer will result in restrictions on the Company's ability to make capital distributions, which include dividend payments, stock repurchases and to pay discretionary bonuses to executive officers. Quantitative measures established by regulation to ensure capital adequacy require the Company and Origin to maintain minimum amounts and ratios (set forth in the table below) of total, common equity Tier 1 capital, Tier 1 capital, Tier 1 capital, and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average total consolidated assets (as defined). Management believes, at December 31, 2022 and 2021, that the Company and Origin met all capital adequacy requirements to which they are subject, including the capital buffer requirement. At December 31, 2022 and 2021, Origin's capital ratios exceeded those levels necessary to be categorized as "well capitalized" under the regulatory framework for prompt corrective action. To be categorized as "well capitalized," Origin must maintain minimum total risk-based, common equity Tier 1 capital, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. A final rule adopted by the federal banking agencies in February 2019 provides banking organizations with the option to phase in, over a three-year period, the adverse day-one regulatory capital effects of the adoption of CECL. In addition, on March 27, 2020, the federal banking agencies issued an interim final rule that gives banking organizations that were required to implement CECL before the end of 2020 the option to delay for two years CECL’s adverse effects on regulatory capital. Origin elected to adopt CECL in the first quarter of 2020 and exercised the option to delay the estimated impact of the adoption of CECL on the Company's regulatory capital for two years (from January 2020 through December 31, 2021). The two-year delay is followed by a three-year transition period of CECL's initial impact on the Company's regulatory capital (from January 1, 2022, through December 31, 2024). The amount representing the CECL impact to the Company's regulatory capital that will be ratably transitioning back into regulatory capital over the transition period is $ 5.1 million and $ 7.6 million at December 31, 2022 and 2021, respectively. 139 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements The actual capital amounts and ratios of the Company and Origin at December 31, 2022 and 2021, are presented in the following table: (Dollars in thousands) December 31, 2022 Actual Minimum Capital Required - Basel III To be Well Capitalized Under Prompt Corrective Action Provisions Common Equity Tier 1 Capital to Risk-Weighted Assets Amount Ratio Amount Ratio Amount Ratio Origin Bancorp, Inc. $ 906,859 10.93 % $ 580,857 7.00 % N/A N/A Origin Bank 952,579 11.50 579,775 7.00 $ 538,363 6.50 % Tier 1 Capital to Risk-Weighted Assets Origin Bancorp, Inc. 922,584 11.12 705,327 8.50 N/A N/A Origin Bank 952,579 11.50 704,013 8.50 662,600 8.00 Total Capital to Risk-Weighted Assets Origin Bancorp, Inc. 1,180,665 14.23 871,290 10.50 N/A N/A Origin Bank 1,109,257 13.39 869,661 10.50 828,249 10.00 Leverage Ratio Origin Bancorp, Inc. 922,584 9.66 381,955 4.00 N/A N/A Origin Bank 952,579 9.94 383,359 4.00 479,198 5.00 December 31, 2021 Common Equity Tier 1 Capital to Risk-Weighted Assets Origin Bancorp, Inc. 681,039 11.20 425,475 7.00 N/A N/A Origin Bank 724,440 11.97 423,819 7.00 393,546 6.50 Tier 1 Capital to Risk-Weighted Assets Origin Bancorp, Inc. 690,448 11.36 516,648 8.50 N/A N/A Origin Bank 724,440 11.97 514,637 8.50 484,365 8.00 Total Capital to Risk-Weighted Assets Origin Bancorp, Inc. 897,503 14.77 638,212 10.50 N/A N/A Origin Bank 852,825 14.09 635,727 10.50 605,454 10.00 Leverage Ratio Origin Bancorp, Inc. 690,448 9.20 300,195 4.00 N/A N/A Origin Bank 724,440 9.66 299,932 4.00 374,915 5.00 In the ordinary course of business, the Company depends on dividends from the Bank to provide funds for the payment of dividends to stockholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared and paid exceed the Bank's year-to-date net income combined with the retained net income for the preceding year, which was $ 170.4 million at December 31, 2022. Stock Repurchases In July 2019, the Company's board of directors authorized a stock repurchase program pursuant to which the Company was authorized purchase up to $ 40 million of its outstanding common stock. The stock repurchase program was approved for a period of three years and expired in June 2022, having repurchased a total of $ 28.0 million of outstanding common stock. 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 have been no stock repurchases during the year ended December 31, 2022. 140 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 19 - Commitments and Contingencies Credit-Related Commitments In the ordinary course of business, the Company enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Company to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Commitments to extend credit include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the merger and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower's credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company. A substantial majority of the letters of credit are standby agreements that obligate the Company to fulfill a customer's financial commitments to a third party if the customer is unable to perform. The Company issues standby letters of credit primarily to provide credit enhancement to its customers' other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services. The contract amounts of these instruments reflect the Company's exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. The table below presents the Company's commitments to extend credit by commitment expiration date for the dates indicated: (Dollars in thousands) December 31, 2022 Less than One Year One-Three Years Three-Five Years Greater than Five Years Total Commitments to extend credit (1) $ 1,093,744 $ 988,212 $ 553,069 $ 96,783 $ 2,731,808 Standby letters of credit 86,922 2,264 — — 89,186 Total off-balance sheet commitments $ 1,180,666 $ 990,476 $ 553,069 $ 96,783 $ 2,820,994 December 31, 2021 Commitments to extend credit (1) $ 643,089 $ 620,741 $ 300,863 $ 56,525 $ 1,621,218 Standby letters of credit 42,516 6,633 — — 49,149 Total off-balance sheet commitments $ 685,605 $ 627,374 $ 300,863 $ 56,525 $ 1,670,367 ____________________________ (1) Includes $ 594.6 million and $ 513.0 million of unconditionally cancellable commitments at December 31, 2022 and 2021, respectively. At December 31, 2022, the Company held 28 unfunded letters of credit from the FHLB totaling $ 277.4 million, with expiration dates ranging from January 14, 2023, to September 22, 2027. At December 31, 2021, the Company held 43 unfunded letters of credit from the FHLB totaling $ 599.3 million, with expiration dates ranging from January 20, 2022, to March 22, 2023. The Company has a total contingent liability of $ 3.1 million as of December 31, 2022, for retention bonuses and guaranteed minimum incentives. The contingent liability consists of retention bonuses totaling $ 1.0 million for former BTH employees, with $ 523,000 , or 50 %, due at December 31, 2023, and the remaining $ 523,000 , or 50 %, due at December 31, 2024. Additionally, the Company will pay $ 2.0 million, in total, in guaranteed minimum incentives to certain employees, with approximately 42 % due on or about December 31, 2023, and 29 % each due on or about December 31, 2024 and 2025, respectively. In all cases, continued employment through the payout date is required in order to receive the compensation. 141 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements In conjunction with the December 31, 2021, acquisitions of the Lincoln Agency, LLC and Pulley-White Insurance Agency, Inc., the Company has a total fair value contingent liability of $ 1.5 million and $ 1.4 million as of December 31, 2022 and 2021, respectively. The amount is payable if Davison Insurance Agency, LLC, the acquirer and surviving wholly-owned subsidiary of the Company, meets certain revenue growth objectives over three years . The fair value and probability of payout of this liability is reassessed annually at the fiscal year end of the Company. Management establishes an asset-specific allowance for certain lending-related commitments and computes a formula-based allowance for performing consumer and commercial lending-related commitments. These are computed using a methodology similar to that used for the commercial loan portfolio, modified for expected maturities and probabilities of drawdown. The reserve for lending-related commitments was $ 4.6 million and $ 2.3 million at December 31, 2022 and 2021, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. Loss Contingencies From time to time, the Company is also party to various legal actions arising in the ordinary course of business. At this time, management does not expect that loss contingencies, if any, arising from any such proceedings, either individually or in the aggregate, would have a material adverse effect on the consolidated financial position or liquidity of the Company. Note 20 - Related Party Transactions Loans to executive officers, directors, and their affiliates at December 31, 2022 and 2021, were as follows: (Dollars in thousands) 2022 2021 Balance, beginning of year $ 471 $ 1,392 Advances 10,853 907 Principal repayments ( 1,156 ) ( 1,544 ) Effect of changes in composition of related parties 66,058 ( 284 ) Balance, end of year $ 76,226 $ 471 Commitments to extend credit $ 2,570 $ 833 None of the above loans were considered non-performing or potential problem loans. These loans were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unaffiliated persons and do not involve more than normal risk of collectability. Deposits from related parties held by the Company at December 31, 2022 and 2021, amounted to $ 40.0 million and $ 30.0 million, respectively. 142 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 21 - Condensed Parent Company Only Financial Statements Financial statements of Origin Bancorp, Inc. (parent company only) are as follows: (Dollars in thousands) December 31, Condensed Balance Sheets 2022 2021 Assets Cash and cash equivalents $ 99,810 $ 28,904 Investment in affiliates/subsidiaries 995,507 774,840 Other assets 19,840 16,343 Total assets $ 1,115,157 $ 820,087 Liabilities and Stockholders' Equity Short-term borrowings $ 30,000 $ — Subordinated indebtedness, net 132,661 88,405 Accrued expenses and other liabilities 2,553 1,471 Total liabilities 165,214 89,876 Stockholders' Equity Common stock 153,733 118,733 Additional paid‑in capital 520,669 242,114 Retained earnings 435,416 363,635 Accumulated other comprehensive (loss) income ( 159,875 ) 5,729 Total stockholders' equity 949,943 730,211 Total liabilities and stockholders' equity $ 1,115,157 $ 820,087 (Dollars in thousands) Year Ended December 31, Condensed Statements of Income 2022 2021 2020 Income: Dividends from subsidiaries $ 17,500 $ 19,200 $ 17,250 Other 408 1,608 12 Total income 17,908 20,808 17,262 Expenses: Interest expense 5,612 4,313 1,333 Salaries and employee benefits 220 221 214 Other 4,915 1,079 1,182 Total expenses 10,747 5,613 2,729 Income before income taxes and equity in undistributed net income of subsidiaries 7,161 15,195 14,533 Income tax benefit 3,359 762 549 Income before equity in undistributed net income of subsidiaries 10,520 15,957 15,082 Equity in undistributed net income of subsidiaries 77,195 92,589 21,275 Net income $ 87,715 $ 108,546 $ 36,357 143 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements (Dollars in thousands) Years Ended December 31, Condensed Statements of Cash Flows 2022 2021 2020 Cash flows from operating activities: Net income $ 87,715 $ 108,546 $ 36,357 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes ( 2,254 ) 7 ( 1 ) Equity in undistributed net income of subsidiaries ( 77,195 ) ( 92,589 ) ( 21,275 ) Amortization of subordinated indebtedness discount including purchase accounting adjustment 181 147 58 Other, net 4,805 ( 5,898 ) 3,633 Net cash (used in) provided by operating activities 13,252 10,213 18,772 Cash flows from investing activities: Lincoln Agency and Pulley-White acquisitions — ( 7,457 ) — BTH acquisition 44,265 — — Capital contributed to subsidiaries — — ( 51,000 ) Net purchases of non-marketable equity securities held in other financial institutions — ( 3,612 ) — Capital calls on limited partnership investments ( 3,722 ) ( 513 ) — Net cash provided by (used in) investing activities 40,543 ( 11,582 ) ( 51,000 ) Cash flows from financing activities: Proceeds from short-term borrowings 30,000 — — Dividends paid ( 15,887 ) ( 11,525 ) ( 8,854 ) Cash received on exercise of stock options 2,998 146 248 Proceeds from issuance of subordinated indebtedness — — 78,556 Payment to repurchase common stock — ( 1,256 ) ( 723 ) Net cash provided by (used by) financing activities 17,111 ( 12,635 ) 69,227 Net increase (decrease) in cash and cash equivalents 70,906 ( 14,004 ) 36,999 Cash and cash equivalents at beginning of year 28,904 42,908 5,909 Cash and cash equivalents at end of year $ 99,810 $ 28,904 $ 42,908 144 Table of Contents ORIGIN BANCORP, INC. Notes to Consolidated Financial Statements Note 22 - Subsequent Events During the second half of 2022, the Company entered into an agreement to sell substantially all of its GNMA mortgage servicing rights portfolio, recognized an impairment of $ 2.0 million, and met all final sale conditions in early 2023. The sale was completed in February 2023. The Company sold approximately $ 1.8 million in GNMA mortgage servicing rights, representing $ 453.3 million in unpaid principal balances, with no significant additional gain or loss realized, and derecognized the related GNMA repurchase asset and offsetting liability of $ 24.6 million. For further information on the sale, please see Note 10 - Mortgage Banking in these notes to the consolidated financial statements. 145 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. 146 Table of Contents