Origin Bancorp
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ____________ to __________Commission file number 001-38487Origin Bancorp, Inc.(Exact name of registrant as specified in its charter)Louisiana 72-1192928(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)500 South Service Road EastRuston, Louisiana 71270(318) 255-2222(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)Securities Registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Exchange on which RegisteredCommon Stock, par value $5.00 per share Nasdaq Global Select MarketSecurities Registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark whether the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'sknowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☒Smaller reporting company ☐Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was $768.0 million as of June 29, 2018, the last business day of theRegistrant's most recently completed second fiscal quarter. Solely for the purpose of this computation, it has been assumed that executive officers and directors of the Registrant are"affiliates".Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 23,747,535 shares of Common Stock, par value $5.00 pershare, were issued and outstanding as of February 25, 2019.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant's Definitive Proxy Statement for the 2019 Annual Meeting of Stockholders of Origin Bancorp, Inc. to be held on April 24,2019, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. Such Definitive Proxy Statement will be filedwith the Securities and Exchange Commission within 120 days after the end of the registrant's fiscal year ended December 31, 2018.ORIGIN BANCORP, INC.FORM 10-KDECEMBER 31, 2018INDEX PageCautionary Note Regarding Forward-Looking Statements3 PART I4 Item 1. Business4 Item 1A. Risk Factors19 Item 1B. Unresolved Staff Comments35 Item 2. Properties35 Item 3. Legal Proceedings35 Item 4. Mine Safety Disclosures35 PART II36 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities36 Item 6. Selected Financial Data38 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations40 Item 7A. Quantitative and Qualitative Disclosures about Market Risk57 Item 8. Financial Statements and Supplementary Data59 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure115 Item 9A. Controls and Procedures115 Item 9B. Other Information116 PART III116 Item 10. Directors, Executive Officers and Corporate Governance116 Item 11. Executive Compensation116 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters116 Item 13. Certain Relationships and Related Transactions, and Director Independence116 Item 14. Principal Accountant Fees and Services116 PART IV116 Item 15. Exhibits, Financial Statement Schedules117 Signatures119Cautionary Note Regarding Forward-Looking StatementsThis Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements preceded by, followed by or that otherwise include the words"anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," and similar expressions or future or conditional verbs such as "could," "may,""should," "will," and "would," are generally forward-looking in nature and not historical facts, although not all forward-looking statements include theforegoing words. Forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry,management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control.Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions anduncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the datemade, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements,including, but not limited to, the following:•deterioration of our asset quality;•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financialhealth of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisitiontransactions;•changes in the value of collateral securing our loans;•our ability to anticipate interest rate changes and manage interest rate risk;•our inability to receive dividends from our Bank and to service debt, pay dividends to our common stockholders and satisfy obligations as theybecome due;•business and economic conditions generally and in the financial services industry, nationally and within our local market area;•our ability to prudently manage our growth and execute our strategy;•changes in management personnel;•our ability to maintain important deposit customer relationships, our reputation or otherwise avoid liquidity risks;•operational risks associated with our business;•volatility and direction of market interest rates;•increased competition in the financial services industry, particularly from regional and national institutions;•changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, as well as tax, trade, monetary and fiscalmatters;•periodic changes to the extensive body of accounting rules and best practices, including the current expected credit loss model, may change thetreatment and recognition of critical financial line items and affect our profitability;•further government intervention in the U.S. financial system;•compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection,securities and tax matters;•natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, and other mattersbeyond our control; and•other factors that are discussed in the section titled "Item 1A. Risk Factors" in this report.3The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in thisreport. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual resultsmay differ materially from what we anticipate. Accordingly, you should not place undue reliance on any forward-looking statements. Any forward-lookingstatement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-lookingstatement, whether as a result of new information, future developments or otherwise. New risks and uncertainties emerge from time to time, and it is notpossible for us to predict those events or how they may affect us. In addition, we cannot assess the impact of each factor on our business or the extent to whichany factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.PART IItem 1. BusinessOur CompanyUnless the context otherwise requires, references in this Annual Report on Form 10-K to "we," "us," "our," "our company," "the Company" or "Origin"refer to Origin Bancorp, Inc., a Louisiana corporation, and its consolidated subsidiaries. All references to "Origin Bank" or "the Bank" refer to Origin Bank,our wholly owned bank subsidiary.We are a financial holding company headquartered in Ruston, Louisiana. Our wholly owned bank subsidiary, Origin Bank, was founded in 1912.Deeply rooted in our history is a culture committed to providing personalized, relationship banking to our clients and communities. We provide a broadrange of financial services to small and medium-sized businesses, municipalities, high net worth individuals and retail clients. We currently operate 41banking centers from Dallas/Fort Worth, Texas across North Louisiana to Central Mississippi, which we refer to as the I-20 Corridor, as well as in Houston,Texas. As of December 31, 2018, we had total assets of $4.82 billion, total loans of $3.84 billion, total deposits of $3.78 billion and total stockholders' equityof $549.8 million.We completed an initial public offering of our common stock in May 2018 as an emerging growth company under the Jumpstart Our BusinessStartups Act of 2012 (the "JOBS Act"). Our common stock is listed on the Nasdaq Global Select Market under the symbol "OBNK."We are committed to building unique client experiences through a strong culture, experienced leadership team and a focus on delivering unmatchedcustomer service throughout Texas, Louisiana, and Mississippi. Our success has been based on (1) a talented team of relationship bankers, executives anddirectors, (2) a diverse footprint with stable and growth-oriented markets, (3) differentiated and customized delivery and service, (4) our core deposit franchiseand (5) an ability to significantly leverage our infrastructure and technology.Successful execution of our strategic plan has produced significant growth in our franchise. Since 2005, we have enhanced our growth byintegrating three bank acquisitions, entering several expansion markets, expanding our product offerings in mortgage lending, mortgage servicing as well asin insurance and private banking. Through these efforts, we have successfully increased our market share in each of our key geographic markets. To supportour growth, we have raised over $281.8 million of new capital since 2006, including proceeds from our initial public offering completed in May 2018. Wehave also supplemented our entry into expansion markets by hiring a number of experienced in-market bankers and banking teams.Our Competitive Strengths and Banking StrategyOrganic Growth Capabilities with Strategic AcquisitionsWe have demonstrated our historical ability to grow our loans and deposits organically. Our team of seasoned bankers has been an important driverof our organic growth by further developing banking relationships with current and potential clients. Our relationship bankers are motivated to increase thesize of their loan and deposit portfolios and generate fee income while maintaining strong credit quality. To promote our organic growth, we strategicallylocate banking centers within our markets and employ highly experienced relationship bankers who proactively develop valuable relationships within thecommunities that we serve. Through these relationships, our bankers are able to capitalize on loan demand across a wide range of industries. This allows us tonot only diversify our loan portfolio, but also focus on loans with quality credit characteristics.4We focus on generating core deposits and, in particular, noninterest-bearing deposits, as our primary funding source to support loan growth. Webelieve motivating our relationship bankers to generate strong core, noninterest-bearing deposit growth enhances our ability to build and strengthen clientrelationships and provide stable funding for future growth.We also intend to continue pursuing selective acquisition opportunities that we expect will enhance our business model in markets across ourattractive geographic footprint.A Unique from Within Client ExperienceOur mission is to passionately pursue ways to make banking more rewarding for our customers, employees, stockholders and communities byproviding a unique client experience. We recognize that providing a distinguished client service begins with a commitment to building, training andretaining a customer-focused team that exemplifies our core values. Relationships built upon trust, encouraging a strong work ethic, innovation, flexibilityand forward-thinking, genuine respect for others, cultivating a commitment to our community and never compromising on integrity are the benchmarks ofour values and our promise is to make every customer feel like our only customer, every time.Concentration on Sound Asset QualityWe believe that asset quality is a key to long-term financial success. We seek to maintain sound asset quality by moderating credit risk and adheringto prudent lending practices and by promoting a relationship-based approach to commercial and consumer banking. Our executive management team hasextensive knowledge of the bank regulatory landscape, significant experience navigating interest rate and credit cycles and a long history of collaboration,which we believe may help us avoid or mitigate unforeseen losses.Expanding Revenue SourcesWe offer commercial and retail customers a wide range of products and services that provide us with a diversified revenue stream and help us tosolidify customer relationships. We provide products and services that compete with large, national banks, but with the personalized attention andresponsiveness of a relationship-focused community bank. Our offerings include traditional retail deposits, treasury management, commercial deposits,mortgage origination and servicing, insurance, mobile banking and online banking. Our clients value our ability to provide the sophisticated products andservices of larger banks, but with a local and agile decision-making process, a focus on building personal relationships, and a commitment to investing in thelocal economy and community. This allows us to build Origin Bank on low-cost core deposit relationships, high credit quality loans, and fee incomegenerated by value-added services. It also allows us to develop strong relationships across industries, creating a diverse commercial loan portfolio.We believe we have an attractive mix of loans and deposits. As of December 31, 2018, our loans held for investment portfolio was comprised of39.1% commercial and industrial loans, and 43.7% commercial real estate loans. This focus on commercial lending increases the asset sensitivity of ourbalance sheet, positioning us well for a rising-rate environment, and provides potential growth opportunities due to our limited real estate concentrations. Asof December 31, 2018, approximately 25.1% of our deposits were noninterest-bearing demand deposits and our cost of total deposits was 0.81% for the yearended December 31, 2018.Our MarketsWe currently operate in Dallas/Fort Worth, Texas, North Louisiana, Central Mississippi, as well as Houston, Texas, all of which offer an attractivecombination of diversity, growth and stability. The Dallas/Fort Worth and Houston markets provide attractive economic environments and offer significantdeposit and lending opportunities as they are home to many large and mid-size corporations across a wide range of industries that include healthcare,manufacturing, higher education, agriculture, transportation and technology.Our legacy markets in North Louisiana offer a stable economic climate and a lower cost deposit-gathering and operational platform. Our footprint inCentral Mississippi comprises areas of significant commercial growth and investment. We believe all of our markets consist of vibrant areas of the UnitedStates with favorable business climates and significant population and employment growth.5Our Banking ServicesWe offer products and services through a network of 41 retail branch offices. We are focused on delivering a broad range of relationship-drivenfinancial services tailored to meet the needs of small and medium-sized businesses, municipalities, high net worth individuals and retail clients in NorthLouisiana, Central Mississippi, Dallas/Fort Worth and Houston, Texas. We principally operate in one business segment, community banking. We areprimarily engaged in attracting deposits from individuals and businesses and using these deposits and borrowed funds to originate commercial, residentialmortgage, construction and consumer loans.We have grown our assets, deposits, and business organically and through acquisition by building on our lending products, expanding our depositproducts and delivery capabilities, opening new branches, and hiring experienced bankers with existing customer relationships in our market areas.A general discussion of the range of financial services we offer follows.Lending ActivitiesWe originate loans primarily secured by single and multi-family real estate, residential construction and commercial buildings. In addition, we makeloans to small and mid-sized businesses, as well as to consumers for a variety of purposes. Our loan portfolio as of the dates indicated was comprised asfollows:(Dollars in thousands)December 31,Real estate:2018 2017 2016 2015 2014Commercial real estate$1,228,402 $1,083,275 $1,026,752 $861,540 $793,408Construction/land/land development429,660 322,404 311,279 310,773 258,421Residential real estate629,714 570,583 414,226 429,137 349,526Total real estate2,287,776 1,976,262 1,752,257 1,601,450 1,401,355Commercial and industrial1,272,566 989,220 1,135,683 1,232,265 1,273,551Mortgage warehouse lines of credit207,871 255,044 201,997 156,803 199,794Consumer loans20,892 20,505 22,138 22,145 22,724Total loans held for investment$3,789,105 $3,241,031 $3,112,075 $3,012,663 $2,897,424Commercial Real Estate Loans. We primarily originate commercial real estate loans and construction/land/land development loans that aregenerally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate andamortize over 25 to 30 years with balloon payments typically due at the end of five years. These loans are generally underwritten by addressing cash flow(debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower'sliquidity and leverage, management experience, ownership structure, economic conditions, industry specific trends and collateral. Commercial real estateloans have contributed interest income of $54.8 million and $46.1 million for the years ended December 31, 2018, and 2017, respectively, whileconstruction/land/land development loans have contributed interest income of $19.6 million and $14.7 million for the years ended December 31, 2018 and2017, respectively.Consumer Loans. Our consumer loan portfolio is primarily composed of secured and unsecured loans that we originate. The largest component ofour consumer loan portfolio is for residential real estate purposes. We originate one-to-four family, owner occupied residential mortgage loans generallysecured by property located in our primary market areas. The majority of our residential mortgage loans consist of loans secured by owner occupied, singlefamily residences. These loans are underwritten by giving consideration to the borrower's ability to pay, stability of employment or source of income, debt-to-income ratio, credit history and loan-to-value ratio. Consumer loans also include closed-end second mortgages, home equity lines of credit and our mortgageloans held for sale.Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital,inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loans are generally underwrittenby addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower's liquidityand leverage, management experience, ownership structure, economic conditions, industry specific trends and collateral. Commercial and industrial loansalso include mortgage warehouse loans which are extended to mortgage companies and secured by loan participations6in mortgages that are typically sold within 20 to 30 days. Commercial and industrial loans have contributed interest income of $54.6 million and $43.3million for the years ended December 31, 2018, and 2017, respectively, while mortgage warehouse loans have contributed interest income of $10.6 millionand $9.6 million for the years ended December 31, 2018, and 2017, respectively.Credit Risks. The principal economic risk associated with each category of loans we make is the creditworthiness of the borrower and the ability ofthe borrower to repay the relevant loan. Borrower creditworthiness is affected by general economic conditions, including interest rates, inflation and in thecase of commercial borrowers, demand for the borrower's products and services, and other factors affecting the borrower's customers, suppliers and employees.Risks associated with real estate loans also include fluctuations in the value of real estate, new job creation trends, tenant vacancy rates and, in thecase of commercial borrowers, the quality of the borrower's management. Consumer loan repayments depend on the borrower's financial stability and are morelikely than commercial loans to be adversely affected by divorce, job loss, illness and other personal hardships.Lending Philosophy. Our lending philosophy is driven by our commitment to centralized underwriting for all loans, local market knowledge, long-term customer relationships and a conservative credit culture. To implement this philosophy we have established various levels of authority and review,including our Credit Risk Management Group. In each loan review, we emphasize cash flow and secondary and tertiary repayment sources, such asguarantors. We generally avoid lending to highly cyclical industries and typically avoid making certain types of loans that we consider to be higher risk.Lending Policies. We have established common documentation and policies for each type of loan. We have also established a corporate loancommittee with authority to approve loans up to the legal lending limit of Origin Bank. Credits of $5.0 million or greater are generally presented for reviewor approval prior to committing to the loan. The corporate loan committee meets weekly and on an ad hoc basis as needed.Origin Bank's board of directors periodically reviews our lending policies and procedures. In addition, there are legal restrictions on the maximumamount of loans available for each lending relationship. As of December 31, 2018, Origin Bank's legal lending limit under the Louisiana Banking Law andthe Regulation O of the Federal Reserve was $175.3 million for secured loans, $70.1 million for unsecured loans and $81.7 million for loans to insiders. As ofDecember 31, 2018, we had established a general in-house lending limit ranging between $30.0 million and $35.0 million to any one borrower, based uponour internal risk rating of the relationship.Deposits and Other Sources of FundsAn important aspect of our business franchise is the ability to gather deposits. As of December 31, 2018, we held $3.78 billion of total deposits andhave grown deposits at a compound annual growth rate of 18.6% since December 31, 2003. As of December 31, 2018, 81.8% of our total deposits were coredeposits (defined as total deposits excluding time deposits greater than $250,000 and brokered deposits). We offer a wide range of deposit services, includingchecking, savings, money market accounts and time deposits. We obtain most of our deposits from individuals, small businesses and municipalities in ourmarket areas. One area of focus has been to create a deposit-focused sales force of business development bankers who have extensive contacts andconnections with targeted clients and centers of influence throughout our communities. We also have access to secondary sources of funding, includingadvances from the Federal Home Loan Bank of Dallas, borrowings at the Federal Reserve Discount Window and other borrowings.Mortgage BankingWe are also engaged in the residential mortgage banking business, which primarily generates income from the sale of mortgage loans as well as theservicing of residential mortgage loans for others. We originate residential mortgage loans in our markets as a service to our existing customers and as a wayto develop relationships with new customers, in order to support our core banking strategy. Revenue from our mortgage banking activities was $9.6 million,$15.8 million and $14.9 million for the years ended December 31, 2018, 2017 and 2016, respectively.InsuranceWe offer a wide variety of personal and commercial property and casualty insurance products through our wholly owned insurance agencies,Thomas & Farr and Reeves, Coon & Funderburg ("RCF"). With 30 years of growth in the insurance industry and more than 87 experienced professionals, ouragencies have primary market locations across Louisiana, but also serve customers in Texas, Mississippi, Arkansas and other states across the U.S. We alsohave a 38% interest in7Lincoln Agency, LLC, a full-service insurance agency operating in North Louisiana. In July 2018, we completed the acquisition of RCF, solidifying ourpresence as one of the larger independent insurance agencies in North Louisiana. Insurance commission and fee income was $9.7 million, $7.2 million and$6.8 million for the years ended December 31, 2018, 2017 and 2016, respectively.Other Banking ServicesGiven customer demand for increased convenience and account access, we offer a wide range of products and services, including 24-hour Internetbanking and voice response information, mobile applications, cash management, overdraft protection, direct deposit, safe deposit boxes, U.S. savings bondsand automatic account transfers.Information Technology SystemsWe continue to make significant investments in our information technology systems for our banking operations and treasury services to enhance ourcapabilities to offer new products and overall customer experience, to provide scale for future growth and acquisitions, and to increase controls andefficiencies in our back-office operations. We have obtained our core data processing platform from a nationally recognized bank processing vendor and weleverage the capabilities of a third-party service provider in developing our network design and architecture. We also actively manage our businesscontinuity plan. The majority of our other systems, including electronic funds transfer and transaction processing, are operated in-house. Online bankingservices and other public-facing web services are performed using third-party service providers. We strive to follow all recommendations outlined by theFederal Financial Institutions Examination Council and we perform regular tests of the adequacy of our contingency plans for key functions and systems.CompetitionThe banking business is highly competitive, and our profitability will depend in large part on our ability to compete with other banks and non-bankfinancial service companies located in our markets for lending opportunities, deposit funds, financial products, bankers and acquisition targets.We are subject to vigorous competition in all aspects of our business from banks, savings banks, savings and loan associations, finance companies,credit unions and other financial service providers, such as money market funds, brokerage firms, consumer finance companies, asset-based non-bank lenders,insurance companies and certain other non-financial entities, including retail stores which may maintain their own credit programs and certain governmentalorganizations which may offer more favorable financing than we can.We conduct business through 41 banking centers in our key market areas of North Louisiana, Central Mississippi, and Dallas/Fort Worth andHouston, Texas. Many other commercial banks, savings institutions and credit unions have offices in our primary market areas. These institutions includemany of the largest banks operating in Texas, Louisiana and Mississippi, including various leading national banks. Our competitors often have greaterresources, have broader geographic markets, have higher lending limits, offer various services that we may not currently offer and may better afford and makebroader use of media advertising, support services and electronic technology than we do. To offset these competitive disadvantages, we depend on ourreputation as having greater personal service, consistency, flexibility and the ability to make credit and other business decisions quickly.EmployeesAs of December 31, 2018, we had 761 full-time equivalent employees. None of our employees are represented by any collective bargaining unit orare parties to a collective bargaining agreement. We believe that our relations with our employees are good.Corporate InformationWe were organized as a business corporation in 1991 under the laws of the state of Louisiana. Our principal executive offices are located at 500South Service Road East, Ruston, Louisiana 71270, and our telephone number is (318) 255-2222. Our website is www.origin.bank. We make available at thisaddress, free of charge, our Annual Report on Form 10-K, our annual reports to stockholders, Quarterly Reports on Form 10-Q, Current Reports on Form 8-Kand amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"). Thesedocuments are also available on the SEC's website at www.sec.gov.8The information contained on or accessible from our website does not constitute a part of this Annual Report on Form 10-K and is not incorporated byreference herein.Regulation and SupervisionGeneralThe U.S. banking industry is highly regulated under federal and state law. Consequently, our growth and earnings performance will be affected notonly by management decisions and general and local economic conditions, but also by the statutes administered by, and the regulations and policies of,various governmental regulatory authorities. These authorities include the Federal Reserve, Federal Deposit Insurance Corporation ("FDIC"), LouisianaOffice of Financial Institutions, Consumer Financial Protection Bureau ("Bureau"), Internal Revenue Service and state taxing authorities. The effect of thesestatutes, regulations and policies, and any changes to such statutes, regulations and policies, can be significant and cannot be predicted.The primary goals of the bank regulatory scheme are to maintain a safe and sound banking system, facilitate the conduct of sound monetary policyand promote fairness and transparency for financial products and services. The system of supervision and regulation applicable to us and our subsidiariesestablishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC's Deposit Insurance Fund, theBank's depositors and the public, rather than our stockholders or creditors. The description below summarizes certain elements of the bank regulatoryframework applicable to us. This description is not intended to describe all laws and regulations applicable to us and our subsidiaries, and the description isqualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are describedherein.Bank Holding Company RegulationBecause we control Origin Bank, we are subject to regulation under the Bank Holding Company Act of 1956, as amended, and to supervision,examination and enforcement by the Federal Reserve. The Bank Holding Company Act and other federal laws subject bank holding companies to particularrestrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcementactions for violations of laws and regulations. The Federal Reserve's jurisdiction also extends to any company that we directly or indirectly control, such asany nonbank subsidiaries and other companies in which we own a controlling investment.Financial Services Industry Reform. The Dodd-Frank Act, which was enacted in 2010, broadly affects the financial services industry byimplementing changes to the financial regulatory landscape aimed at strengthening the sound operation of the financial services sector, including provisionsthat, among other things:•apply the same leverage and risk-based capital requirements that cover insured depository institutions to bank holding companies with total assetsin excess of $1 billion;•establish the Bureau to, among other things, establish and implement rules and regulations applicable to all entities offering consumer financialproducts or services;•permanently increase FDIC deposit insurance maximum to $250,000 and broaden the base for FDIC insurance assessments from the amount ofinsured deposits to average total consolidated assets less average tangible equity during the assessment period, subject to certain adjustments;•eliminate the upper limit for the reserve ratio designated by the FDIC each year for the Deposit Insurance Fund, increase the minimum designatedreserve ratio of the deposit insurance fund from 1.15% to 1.35% of the estimated amount of total insured deposits by September 30, 2020, andeliminate the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds;•permit banks to branch across state lines if the laws of the state where the new branch is to be established would permit the establishment of thebranch if it were part of a bank that was chartered by such state;•repeal the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on businesstransaction and other accounts;9•require bank holding companies and banks to be "well capitalized" and "well managed" in order to acquire banks located outside of their home stateand require any bank holding company electing to be treated as a financial holding company to be "well capitalized" and "well managed;"•direct the Federal Reserve to establish limitations on interchange fees for debit cards under a "reasonable and proportional cost" per transactionstandard;•prohibit a banking entity under a provision known as the Volcker Rule from engaging in proprietary trading or holding an ownership interest in orsponsoring a hedge fund or a private equity fund;•increase regulation of consumer protections regarding mortgage originations, including originator compensation, minimum repayment standards,and prepayment consideration;•implement corporate governance revisions, including with regard to executive compensation and proxy access by stockholders; and•increase the authority of the Federal Reserve to examine us and any nonbank subsidiaries.In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act ("EGRRCPA") was signed into law. While EGRRCPApreserves the fundamental elements of the post-Dodd-Frank Act regulatory framework, it includes modifications that are intended to result in meaningfulregulatory relief both from certain provisions of the Dodd-Frank Act and from certain regulatory capital rules for smaller and certain regional bankingorganizations. Among other things, EGRRCPA exempts us from the Volcker Rule, allows us to avoid the risk-based capital rules if we maintain a specific"community bank leverage ratio," revises the capital treatment of certain commercial real estate loans, and amends certain Truth in Lending Act requirementsfor residential mortgage loans.Even after the EGRRCPA modifications, the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of ourbusiness practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes mayalso require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory andregulatory requirements. Failure to comply with any new requirements may negatively impact our results of operations and financial condition.Revised Rules on Regulatory Capital. The Federal Reserve monitors our capital adequacy at the holding company level by using a combination ofrisk-based guidelines and leverage ratios and considers our capital levels when taking action on various types of applications and when conductingsupervisory activities. The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profilesamong financial institutions and their holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets.The regulatory capital rules applicable to us were revised, effective January 1, 2015, under the Basel III regulatory capital framework. These rules include anew common equity Tier 1 risk-based capital requirement and establish criteria that instruments must meet to be considered common equity Tier 1 capital,additional Tier 1 capital or Tier 2 capital. These enhancements are designed to both improve the quality and increase the quantity of capital required to beheld by banking organizations, better equipping the U.S. banking system to cope with adverse economic conditions. Under these rules, we are required tosatisfy four minimum capital standards: (1) a Tier 1 capital to average total consolidated assets ratio, or "leverage ratio," of at least 4.0%, (2) a common equityTier 1 capital to risk-weighted assets ratio, or "common equity Tier 1 risk-based capital ratio," of 4.5%, (3) a Tier 1 capital to risk-weighted assets ratio, or"Tier 1 risk-based capital ratio," of at least 6.0%, and (4) a total risk-based capital (Tier 1 plus Tier 2) to risk-weighted assets ratio, or "total risk-based capitalratio," of at least 8.0%.The capital rules also require bank holding companies to maintain a capital conservation buffer above the minimum capital requirements composedsolely of common equity Tier 1 capital to avoid certain restrictions on capital distributions and discretionary bonus payments to executive officers. Whenfully phased in, the capital conservation buffer requirement will effectively require banking organizations to maintain regulatory risk-based capital ratios atleast 2.5% above the minimum risk-based capital requirements set forth above. This buffer is intended to help to ensure that banking organizations conservecapital when it is most needed, allowing them to better weather periods of economic stress. The capital conservation buffer is being phasing in over a fouryear period that began in January 2016. As of January 1, 2018, the phased-in portion of the capital conservation buffer was 1.875% of risk-weighted assets,and the buffer was fully phased in on January 1, 2019.10The revised regulatory capital rules implement stricter eligibility criteria for regulatory capital instruments that would disallow the inclusion ofinstruments, such as trust preferred securities (other than grandfathered trust preferred securities, such as those that we have issued), in Tier 1 capital goingforward and new constraints on the inclusion of minority interests, mortgage servicing assets, deferred tax assets and certain investments in the capital ofunconsolidated financial institutions. In addition, the rules require that most regulatory capital deductions be made from common equity Tier 1 capital.These rules also set forth certain changes in the methods of calculating certain risk-weighted assets, which in turn will affect the calculation of risk-based capital ratios. Under the rules, higher or more sensitive risk weights have been assigned to various categories of assets, including, certain creditfacilities that finance the acquisition, development or construction of real property, certain exposures or credits that are 90 days past due or on nonaccrualstatus, foreign exposures and certain corporate exposures. In addition, these rules include greater recognition of collateral and guarantees, and revised capitaltreatment for derivatives and repo-style transactions.EGRRCPA exempts most banking organizations with less than $10 billion in total consolidated assets from the risk-based and leverage capital rulesand the capital conservation buffer if they maintain a "community bank leverage ratio" ("CBLR") of between 8% and 10%, the precise standard to be set bythe federal banking agencies, and meet certain other requirements. On December 21, 2018, the agencies proposed a CBLR of 9%. We discuss the CBLRfurther below under "Bank Regulation – Capital Adequacy Requirements."These capital requirements are minimum requirements. The Federal Reserve may also set higher capital requirements if warranted by our risk profile,economic conditions impacting our market or other circumstances particular to our organization. For example, holding companies experiencing internalgrowth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significantreliance on intangible assets. Failure to meet capital guidelines could subject us to a variety of enforcement remedies, including issuance of a capitaldirective or restrictions on our operations and expansionary activities.Imposition of Liability for Undercapitalized Subsidiaries. Federal banking regulations require FDIC-insured banks that become undercapitalized tosubmit a capital restoration plan. The capital restoration plan of a bank controlled by a bank holding company will not be accepted by the regulators unlesseach company having control of the undercapitalized institution guarantees the subsidiary's compliance with the capital restoration plan up to a certainspecified amount. Any such guarantee from a bank holding company is entitled to a priority of payment in bankruptcy.The aggregate liability of the holding company of an undercapitalized bank in such a guarantee is limited to the lesser of 5% of the bank's assets atthe time it became undercapitalized or the amount necessary to cause the institution to be adequately capitalized. The federal banking agencies have greaterpower in situations where a bank becomes significantly or critically undercapitalized or fails to submit a capital restoration plan. For example, a bankholding company controlling such a bank can be required to obtain prior Federal Reserve approval of proposed dividends, or might be required to divest thebank or other affiliates.Acquisitions by Bank Holding Companies. We must obtain the prior approval of the Federal Reserve before (1) acquiring more than 5% of the votingstock of any bank or other bank holding company, (2) acquiring all or substantially all of the assets of any bank or bank holding company, or (3) merging orconsolidating with any other bank holding company. In evaluating applications with respect to these transactions, the Federal Reserve is required toconsider, among other things, the effect of the acquisition on competition, the financial condition, managerial resources and future prospects of the bankholding company and the banks concerned, the convenience and needs of the communities to be served (including the record of performance under theCommunity Reinvestment Act), the effectiveness of the applicant in combating money laundering activities, and the extent to which the proposedacquisition would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. The Federal Reserve can deny anapplication based on the above criteria or other considerations. In addition, as a condition to receiving regulatory approval, the Federal Reserve can imposeconditions on the acquirer or the business to be acquired, which may not be acceptable or, if acceptable, may reduce the benefit of a proposed acquisition.Control Acquisitions. Subject to various exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with relatedregulations, require Federal Reserve approval or non-objection prior to any person or company acquiring "control" of a bank holding company. Although"control" is based on all of the facts and circumstances surrounding the investment, control under the Bank Holding Company Act is conclusively presumedto exist if a person or company acquires 25% of more of any class of voting securities of the bank holding company, controls the election of a majority of theboard of directors, or able to exercise a controlling influence over the management or policies of the company.11Control of a bank holding company is rebuttably presumed to exist under the Change in Bank Control Act if the acquiring person or entity will own 10% ormore of any class of voting securities immediately following the transaction and either no other person will hold a greater percentage of that class of votingsecurities after the acquisition or the bank holding company has publicly registered securities.Regulatory Restrictions on Dividends; Source of Strength. As a financial holding company, we are subject to certain restrictions on dividends underapplicable banking laws and regulations. The Federal Reserve has issued a supervisory letter that provides that a bank holding company should not paydividends unless: (1) its net income over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends; (2) the prospective rateof earnings retention is consistent with the capital needs, asset quality and overall financial condition of the bank holding company; and (3) the bankholding company will continue to meet, and is not in danger of failing to meet, minimum regulatory capital adequacy ratios. Failure to comply with thesupervisory letter could result in a supervisory finding that the bank holding company is operating in an unsafe and unsound manner. In addition, our abilityto pay dividends may also be limited if we must maintain the capital conservation buffer under the regulatory capital rules. In the current financial andeconomic environment, the Federal Reserve Board has indicated that bank holding companies should carefully review their dividend policy and hasdiscouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong. The Federal Reserve may furtherrestrict the payment of dividends by engaging in supervisory action to restrict dividends or by requiring us to maintain a higher level of capital then wouldotherwise be required under the Basel III minimum capital requirements.Under longstanding Federal Reserve policy, which has been codified by the Dodd-Frank Act, we are expected to act as a source of financial strengthto, and to commit resources to support, Origin Bank. This support may be required at times when we may not be inclined to provide it. In addition, anycapital loans that we make to Origin Bank are subordinate in right of payment to deposits and to certain other indebtedness of Origin Bank. As discussedabove, in certain circumstances, we could also be required to guarantee the capital restoration plan of Origin Bank, if it became undercapitalized for purposesof the Federal Reserve's prompt corrective action regulations. In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency tomaintain the capital of Origin Bank under a capital restoration plan would be assumed by the bankruptcy trustee and entitled to a priority of payment.Scope of Permissible Activities. In general, the Bank Holding Company Act limits the activities permissible for bank holding companies to thebusiness of banking, managing or controlling banks and such other activities as the Federal Reserve has determined to be so closely related to banking as tobe properly incident thereto. Permissible activities for a bank holding company include, among others, operating a mortgage, finance, credit card or factoringcompany; performing certain data processing operations; providing investment and financial advice; acting as an insurance agent for certain types of credit-related insurance; leasing personal property on a full-payout, nonoperating basis; and providing certain stock brokerage services. A bank holding companymay also make an investment of up to 5% of any class of voting securities of any company that is otherwise a non-controlling investment.A bank holding company may elect to become a financial holding company, as we have done, it may engage in activities that are (1) financial innature or incidental to such financial activity or (2) complementary to a financial activity and which do not pose a substantial risk to the safety andsoundness of a depository institution or to the financial system generally. These activities include securities dealing, underwriting and market making,insurance underwriting and agency activities, merchant banking and insurance company portfolio investments. Expanded financial activities of financialholding companies generally will be regulated according to the type of such financial activity: banking activities by banking regulators, securities activitiesby securities regulators and insurance activities by insurance regulators. A bank holding company may elect to be treated as a financial holding company if itis "well capitalized" and "well managed" and if each of its depository institution subsidiaries is "well capitalized" and "well managed," and has received arating of not less than Satisfactory on each such institution's most recent examinations under the Community Reinvestment Act. We have made a financialholding company election and currently engage in our insurance agency activities through the broader authority available to financial holding companies.If we fail to continue to meet any of the requirements for financial holding company status, we may be required to enter into an agreement with theFederal Reserve to comply with all applicable capital and management requirements within a certain period of time or lose our financial holding companydesignation, which could also result in a requirement to divest of any businesses for which a financial holding company election was required. In addition,the Federal Reserve may place limitations on our ability to conduct the broader financial activities permissible for financial holding companies during anyperiod of noncompliance.12Volcker Rule. Section 13 of the Bank Holding Company Act, commonly known as the "Volcker Rule," has generally prohibited insured depositoryinstitutions and their affiliates from sponsoring or acquiring an ownership interest in certain investment funds, including hedge funds and private equityfunds. The Volcker Rule also places restrictions on proprietary trading. EGRRCPA exempts insured depository institutions with $10 billion or less in totalconsolidated assets from the Volcker Rule, and the Federal Reserve has effectively extended the exemption to bank holding companies.Safe and Sound Banking Practices. Bank holding companies are not permitted to engage in unsafe and unsound banking practices. For example, theFederal Reserve's Regulation Y generally requires a bank holding company to provide the Federal Reserve with prior notice of any redemption or repurchaseof its own equity securities, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, isequal to 10.0% or more of the bank holding company's consolidated net worth. The Federal Reserve may oppose the transaction if it believes that thetransaction would constitute an unsafe or unsound practice or would violate any law or regulation. In certain circumstances, the Federal Reserve could takethe position that paying a dividend would constitute an unsafe or unsound banking practice. The Federal Reserve has broad authority to prohibit activities ofbank holding companies and their nonbanking subsidiaries which represent unsafe and unsound banking practices, result in breaches of fiduciary duty orwhich constitute violations of laws or regulations, and can assess civil money penalties or impose enforcement action for such activities.Bank RegulationOrigin Bank is a commercial bank chartered under the laws of the State of Louisiana and is a member of the Federal Reserve System. In addition, itsdeposits are insured by the FDIC to the maximum extent permitted by law. As a result, Origin Bank is subject to extensive regulation, supervision andexamination by the Louisiana Office of Financial Institutions and the Federal Reserve. As an insured depository institution, the bank is subject to regulationby the FDIC, although the Federal Reserve is the Bank's primary federal regulator. Finally, Origin Bank is also subject to secondary oversight by statebanking authorities in other states in which it maintains banking offices. The bank regulatory agencies have the power to enforce compliance with applicablebanking laws and regulations. These requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature andamount of loans that may be made and the interest that may be charged thereon and restrictions relating to investments and other activities of Origin Bank.Capital Adequacy Requirements. The Federal Reserve and Louisiana Office of Financial Institutions monitor the capital adequacy of Origin Bankby using a combination of risk-based guidelines and leverage ratios similar to those applied at the holding company level. These agencies consider thebank's capital levels when taking action on various types of applications and when conducting supervisory activities related to the safety and soundness ofthe bank and the banking system. Under the revised capital rules which became effective on January 1, 2015, Origin Bank is required to maintain fourminimum capital standards: (1) a leverage ratio of at least 4.0%, (2) a common equity Tier 1 risk-based capital ratio of 4.5%, (3) a Tier 1 risk-based capitalratio of at least 6.0%, and (4) a total risk-based capital ratio of at least 8.0%. The capital rules also require FDIC-insured banks to maintain a capitalconservation buffer above the minimum capital requirements to avoid certain restrictions on capital distributions and discretionary bonus payments toexecutive officers. The capital conservation buffer must be composed solely of common equity Tier 1 capital. When fully phased in on January 1, 2019, thecapital conservation buffer requirement will effectively require banking organizations to maintain regulatory risk-based capital ratios at least 2.5% above theminimum risk-based capital requirements.Banks (and bank holding companies) with less than $10 billion in total consolidated assets may be exempt from the risk-based and leverage capitalrequirements as well as the capital conservation buffer if the federal banking agencies finalize a rule on the CBLR and if the banks meet the requirements ofthe rule. EGRRCPA required the agencies to establish this ratio within a range of 8% to 10%. The agencies proposed a rule with a 9% CBLR that would beavailable to banking firms under the $10 billion threshold provided that certain assets, liabilities and off-balance sheet items were below certain ceilings.These capital requirements are minimum requirements. The Federal Reserve or Louisiana Office of Financial Institutions may also set higher capitalrequirements if warranted by the risk profile of Origin Bank, economic conditions impacting its markets or other circumstances particular to the bank. Forexample, Federal Reserve guidance provides that higher capital may be required to take adequate account of, among other things, interest rate risk and therisks posed by concentrations of credit, nontraditional activities or securities trading activities. In addition, the Federal Reserve's prompt corrective actionregulations discussed below may, in effect, increase the minimum regulatory capital ratios for banking organizations. Failure to meet capital guidelines couldsubject Origin Bank to a variety of enforcement remedies, including issuance of a capital directive, restrictions on business activities and other measuresunder the Federal Reserve's prompt corrective action regulations.13Corrective Measures for Capital Deficiencies. The federal banking regulators are required by the Federal Deposit Insurance Act to take "promptcorrective action" with respect to capital-deficient banks that are FDIC-insured. For this purpose, a bank is placed in one of the following five capital tiers:"well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." The bank's capital tierdepends upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation.To be well capitalized, a bank must have a total risk-based capital ratio of at least 10.0%, a Tier 1 risk-based capital ratio of at least 8.0%, a commonequity Tier 1 risk-based capital ratio of at least 6.5%, and a leverage ratio of at least 5.0%, and must not be subject to any written agreement, order or directiverequiring it to maintain a specific capital level for any capital measure. At December 31, 2018, Origin Bank met the requirements to be categorized as wellcapitalized under the prompt corrective action framework currently in effect. The pending CBLR proposal would treat a bank that met its requirements aswell capitalized without reference to any of the current ratios.As a bank's capital decreases, the enforcement authority of its regulators becomes more severe. Banks that are adequately, but not well, capitalizedmay not accept, renew or rollover brokered deposits except with a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid onits deposits. The Federal Reserve's prompt corrective action regulations also generally prohibit a bank from making any capital distributions (includingpayment of a dividend) or paying any management fee to its parent holding company if the bank would thereafter be undercapitalized. Undercapitalizedbanks are also subject to growth limitations, may not accept, renew or rollover brokered deposits, and are required to submit a capital restoration plan. TheFederal Reserve may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeedin restoring the bank's capital. Significantly undercapitalized banks may be subject to a number of requirements and restrictions, including orders to sellsufficient shares or obligations to become adequately capitalized, limitations on asset growth, and cessation of receipt of deposits from correspondent banks.Generally, subject to a narrow exception, the FDIC must appoint a receiver or conservator for an institution that is critically undercapitalized. The capitalclassification of a bank also affects the bank's ability to engage in certain activities and the deposit insurance premiums paid by the bank.Bank Mergers. Section 18(c) of the Federal Deposit Insurance Act, known as the "Bank Merger Act," requires the written approval of a bank's primaryfederal regulator before the bank may (1) acquire through merger or consolidation, (2) purchase or otherwise acquire the assets of, or (3) assume the depositliabilities of, another bank. The Bank Merger Act prohibits the reviewing agency from approving any proposed merger transaction that would result in amonopoly, or would further a combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States.Similarly, the Bank Merger Act prohibits the reviewing agency from approving a proposed merger transaction the effect of which in any section of thecountry may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade. Anexception may be made in the case of a merger transaction the effect of which would be to substantially lessen competition, tend to create a monopoly, orotherwise restrain trade, if the reviewing agency finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interestby the probable effect of the transaction in meeting the convenience and needs of the community to be served.In every proposed merger transaction, the reviewing agency must also consider the financial and managerial resources and future prospects of theexisting and proposed institutions, the convenience and needs of the community to be served, and the effectiveness of each insured depository institutioninvolved in the proposed merger transaction in combating money-laundering activities.Branching. Under Louisiana law, Origin Bank is permitted to establish additional branch offices within Louisiana, subject to the approval of theLouisiana Office of Financial Institutions. As a result of the Dodd-Frank Act, the Bank may also establish additional branch offices outside of Louisiana,subject to prior regulatory approval, so long as the laws of the state where the branch is to be located would permit a state bank chartered in that state toestablish a branch. Any new branch, whether located inside or outside of Louisiana, must also be approved by the Federal Reserve, as the Bank's primaryfederal regulator. Origin Bank may also establish offices in other states by merging with banks or by purchasing branches of other banks in other states,subject to certain restrictions.Restrictions on Transactions with Affiliates and Insiders. Federal law strictly limits the ability of banks to engage in transactions with theiraffiliates, including their bank holding companies. Sections 23A and 23B of the Federal Reserve Act, and Federal Reserve's Regulation W, imposequantitative limits, qualitative standards and collateral requirements on certain transactions by a bank with, or for the benefit of, its affiliates. Generally,Sections 23A and 23B (1) limit the extent to which the bank or its subsidiaries may engage in "covered transactions" with any one affiliate to an amountequal to 10% of the bank's capital stock and surplus, and limit the aggregate of all such transactions with all affiliates to an amount equal to 20%14of its capital stock and surplus, and (2) require that all such transactions be on terms substantially the same, or at least as favorable, to the bank or subsidiaryas those that would be provided to a non-affiliate. The term "covered transaction" includes the making of loans to an affiliate, the purchase of assets from anaffiliate, the issuance of a guarantee on behalf of an affiliate, and several other types of transactions.The Dodd-Frank Act expanded the coverage and scope of the limitations on affiliate transactions within a banking organization, including anexpansion of what types of transactions are covered transactions to include credit exposures related to derivatives, repurchase agreements and securitieslending arrangements and an increase in the amount of time for which collateral requirements regarding covered transactions must be satisfied.Federal law also limits a bank's authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlledby such persons. Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow creditunderwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons. Also, the terms of suchextensions of credit may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations onthe amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the bank's capital. Loans tosenior executive officers of a bank are subject to additional restrictions. Insiders may be subject to enforcement actions for accepting loans in violation ofapplicable restrictions.Regulatory Restrictions on Dividends. Origin Bank is subject to certain restrictions on dividends under federal and state laws, regulations andpolicies. In general, Origin Bank may pay dividends to us without the approval of the Louisiana Office of Financial Institutions so long as the amount of thedividend does not exceed the bank's net profits earned during the current year combined with its retained net profits of the immediately preceding year. Thebank is required to obtain the approval of the Louisiana Office of Financial Institutions for any amount in excess of this threshold. In addition, under federallaw, Origin Bank may not pay any dividend to us if it is undercapitalized or the payment of the dividend would cause it to become undercapitalized. TheFederal Reserve may further restrict the payment of dividends by requiring the bank to maintain a higher level of capital than would otherwise be required tobe adequately capitalized for regulatory purposes. Under the capital rules (and before the establishment of the CBLR), the failure to maintain an adequatecapital conservation buffer, as discussed above, may also result in dividend restrictions. Moreover, if, in the opinion of the Federal Reserve, Origin Bank isengaged in an unsound practice (which could include the payment of dividends), the Federal Reserve may require, generally after notice and hearing, thebank to cease such practice. The Federal Reserve has indicated that paying dividends that deplete a depository institution's capital base to an inadequatelevel would be an unsafe banking practice. The Federal Reserve has also issued guidance providing that a bank generally should pay dividends only when(1) the bank's net income available to common stockholders over the past year has been sufficient to fully fund the dividends and (2) the prospective rate ofearnings retention appears consistent with the bank's capital needs, asset quality, and overall financial condition.Incentive Compensation Guidance. The federal banking agencies have issued comprehensive guidance on incentive compensation policiesintended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of those organizations byencouraging excessive risk-taking. The incentive compensation guidance sets expectations for banking organizations concerning their incentivecompensation arrangements and related risk management, control and governance processes. The incentive compensation guidance, which covers allemployees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon three primaryprinciples: (1) balanced risk- taking incentives, (2) compatibility with effective controls and risk management and (3) strong corporate governance. Anydeficiencies in compensation practices that are identified may be incorporated into the organization's supervisory ratings, which can affect its ability to makeacquisitions or take other actions. In addition, under the incentive compensation guidance, a banking organization's federal supervisor may initiateenforcement action if the organization's incentive compensation arrangements pose a risk to the safety and soundness of the organization. Further, the capitalconservation buffer described above would limit discretionary bonus payments to bank executives if the institution's regulatory capital ratios failed toexceed certain thresholds. The scope and content of the U.S. banking regulators' policies on executive compensation are continuing to develop and evolve.The agencies (together with certain other federal agencies) proposed a regulation in 2016 on incentive compensation (as required by the Dodd-Frank Act) buthave not finalized it.Deposit Insurance Assessments. FDIC-insured banks are required to pay deposit insurance assessments to the FDIC. The amount of the assessment isbased on the size of the bank's assessment base, which is equal to its average consolidated total assets less its average tangible equity, and its riskclassification under an FDIC risk-based assessment system. The FDIC has revised its methodology for determining assessments from time to time. The currentmethodology, which has been in place since the third quarter of 2016, has a range of assessment rates from three basis points to 30 basis points on insured15deposits. All insured depository institutions with the exception of large and complex banking organizations are assigned to one of three risk categories basedon their composite CAMELS ratings. Each of the three risk categories has a range of rates, and the rate for a particular institution is determined based onseven financial ratios and the weighted average of its component CAMELS ratings. The FDIC may adjust assessment rates downward as the reserve ratio ofthe Deposit Insurance Fund exceeds 2.0% and higher thresholds. The FDIC can also impose special assessments in certain instances. If there are additionalbank or financial institution failures or if the FDIC otherwise determines to increase assessment rates, Origin Bank may be required to pay higher FDICinsurance premiums. In addition, all FDIC-insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by theFinancing Corporation, an agency of the federal government established to recapitalize the predecessor to the Deposit Insurance Fund. These assessmentswill continue until the bonds mature between now and 2019.Community Reinvestment Act. The Community Reinvestment Act ("CRA") and the related regulations are intended to encourage banks to help meetthe credit needs of their entire assessment area, including low and moderate income neighborhoods, consistent with the safe and sound operations of suchbanks. These regulations also provide for regulatory assessment of a bank's CRA performance record when considering applications to establish branches,merger applications and applications to acquire the assets and assume the liabilities of another bank. The CRA requires federal banking agencies to makepublic their ratings of banks' performance under the CRA. In the case of a bank holding company transaction, the CRA performance record of the subsidiarybanks of the bank holding companies involved in the transaction are reviewed in connection with the filing of an application to acquire ownership or controlof shares or assets of a bank or to merge with any other bank holding company. An unsatisfactory CRA record could substantially delay approval or result indenial of an application. In addition, a financial holding company may face limitations on activities and acquisitions if its subsidiary depository institutionsdo not have a least a Satisfactory rating. Origin Bank received a Satisfactory rating in its most recent CRA examination.Financial Modernization. Under the Gramm-Leach-Bliley Act, banks may establish financial subsidiaries to engage, subject to limitations oninvestment, in activities that are financial in nature, other than insurance underwriting as principal, insurance company portfolio investment, real estatedevelopment, real estate investment, annuity issuance and merchant banking activities. To do so, a bank must be well capitalized, well managed and have aCRA rating from its primary federal regulator of Satisfactory or better. Subsidiary banks of financial holding companies or banks with financial subsidiariesmust remain well capitalized and well managed in order to continue to engage in activities that are financial in nature without regulatory actions orrestrictions. Such actions or restrictions could include divestiture of the financial subsidiary or subsidiaries. In addition, a financial holding company or abank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holdingcompany or the bank has a CRA rating of Satisfactory of better.Concentrated Commercial Real Estate Lending Regulations. The federal banking regulatory agencies have promulgated guidance governingfinancial institutions with concentrations in commercial real estate lending. The guidance provides that a bank may have a concentration in commercial realestate lending if (1) total reported loans for construction, land development, and other land represent 100.0% or more of total capital or (2) total commercialreal estate loans represent 300.0% or more of the bank's total capital and the outstanding balance of the bank's commercial real estate loan portfolio hasincreased 50% or more during the prior 36 months. If a concentration is present, the bank will be subject to further regulatory scrutiny with respect to its riskmanagement practices for commercial real estate lending. At December 31, 2017, Origin Bank's total reported loans for construction, land development, andother land represented less than 100% of the bank's total capital, and its total commercial real estate loans represented less than 300% of the bank's totalcapital.Consumer Laws and Regulations. Origin Bank is subject to numerous laws and regulations intended to protect consumers in transactions with thebank. These laws include, among others, laws regarding unfair, deceptive and abusive acts and practices, state usury laws and federal consumer protectionstatutes. These federal laws include the Electronic Fund Transfer Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair DebtCollection Practices Act, the Real Estate Procedures Act of 1974, the S.A.F.E. Mortgage Licensing Act of 2008, the Truth in Lending Act and the Truth inSavings Act, among others. Many states and local jurisdictions have consumer protection laws analogous and in addition to those enacted under federal law.These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers whentaking deposits, making loans and conducting other types of transactions. Failure to comply with these laws and regulations could give rise to regulatorysanctions, customer rescission rights, action by state and local attorneys general and civil or criminal liability.In addition, the Dodd-Frank Act created the Bureau, which has broad authority to regulate the offering and provision of consumer financial products.The Bureau has authority to promulgate regulations, issue orders, guidance, interpretations16and policy statements, conduct examinations and bring enforcement actions with regard to consumer financial products and services. In general, banks withassets of $10 billion or less, such as Origin Bank, will continue to be examined for consumer compliance, and subject to enforcement actions, by theirprimary federal regulator, in our case the Federal Reserve. However, the Bureau may participate in examinations of these smaller institutions on a "samplingbasis" and may refer potential enforcement actions against such institutions to their primary federal regulators. In addition, the Dodd-Frank Act permits statesto adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the Bureau, and state attorneys general arepermitted to enforce certain consumer protection rules adopted by the Bureau against certain institutions.Mortgage Lending Rules. The Dodd-Frank Act authorized the Bureau to establish certain minimum standards for the origination of residentialmortgages, including a determination of the borrower's ability to repay. Under the Dodd-Frank Act, financial institutions may not make a residentialmortgage loan unless they make a "reasonable and good faith determination" that the consumer has a "reasonable ability" to repay the loan. The Dodd-FrankAct allows borrowers to raise certain defenses to foreclosure but provides a presumption or rebuttable presumption of compliance for loans that are "qualifiedmortgages." The Bureau has also issued regulations that, among other things, specify the types of income and assets that may be considered in the ability-to-repay determination, the permissible sources for income verification, and the required methods of calculating the loan's monthly payments. These regulationsextend the requirement that creditors verify and document a borrower's income and assets to include a requirement to verify all information that creditors relyon in determining repayment ability. The rules also define "qualified mortgages" based on adherence to certain underwriting standards - for example, aborrower's debt-to-income ratio may not exceed 43.0% - and certain restrictions on loan terms. Points and fees are subject to a relatively stringent cap, and theterms include a wide array of payments that may be made in the course of closing a loan. Certain loans, including interest-only loans and negativeamortization loans, cannot be qualified mortgages. Also, the Dodd-Frank Act and the Bureau's final rule on loan originator compensation prohibit certaincompensation payments to loan originators and the steering of consumers to loans not in their interest, particularly if the loans will result in greatercompensation for a loan originator. The Dodd-Frank Act and the Bureau's implementing regulations also impose additional disclosure requirements withrespect to the origination and sale of residential mortgages. EGRRCPA modifies certain of these requirements by, among other things, creating a safe harborfrom the ability-to-repay standards for certain mortgage loans made by a bank with less than $10 billion in total consolidated assets.Anti-Money Laundering and OFAC. The Bank Secrecy Act requires federal savings associations and other financial institutions to establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The principal requirements for an insureddepository institution include (i) establishment of an anti-money laundering program that includes training and audit components; (ii) establishment of a"know your customer" program involving due diligence to confirm the identity of persons seeking to open accounts and to deny accounts to those personsunable to demonstrate their identities; (iii) the filing of currency transaction reports for deposits and withdrawals of large amounts of cash; (iv) additionalprecautions for accounts sought and managed for non-U.S. persons; and (v) verification and certification of money laundering risk with respect to privatebanking and foreign correspondent banking relationships. For many of these tasks a bank must keep records to be made available to its primary federalregulator. Anti- money laundering rules and policies are developed by a bureau within the U.S. Department of the Treasury, the Financial CrimesEnforcement Network, but compliance by individual institutions is overseen by its primary federal regulator, in the Bank's case, the Office of the Comptrollerof the Currency.The Office of Foreign Assets Control ("OFAC") administers laws and Executive Orders that prohibit U.S. entities from engaging in transactions withcertain prohibited parties. OFAC publishes lists of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, known as SpeciallyDesignated Nationals and Blocked Persons. Generally, if a bank identifies a transaction, account or wire transfer relating to a person or entity on an OFAClist, it must freeze the account or block the transaction, file a suspicious activity report and notify the appropriate authorities.Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution's compliance inconnection with the regulatory review of applications, including applications for bank mergers and acquisitions. Failure of a financial institution to maintainand implement adequate programs to combat money laundering and terrorist financing and comply with OFAC sanctions, or to comply with relevant lawsand regulations, could have serious legal, reputational and financial consequences for the institution.17Privacy. Federal law and regulations limit the ability of banks and other financial institutions to disclose non-public information about consumersto non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to preventdisclosure of certain personal information to a non-affiliated third party. These regulations affect how consumer information is transmitted through financialservices companies and conveyed to outside vendors. In addition, consumers may also prevent disclosure of certain information among affiliated companiesthat is assembled or used to determine eligibility for a product or service, such as that shown on consumer credit reports and asset and income informationfrom applications. Consumers also have the option to direct banks and other financial institutions not to share information about transactions andexperiences with affiliated companies for the purpose of marketing products or services. In addition to applicable federal privacy regulations, Origin Bank issubject to certain state privacy laws.Federal Home Loan Bank System. Origin Bank is a member of the Federal Home Loan Bank of Dallas, which is one of the 11 regional Federal HomeLoan Banks composing the Federal Home Loan Bank system. The Federal Home Loan Banks make loans to their member banks in accordance with policiesand procedures established by the Federal Home Loan Bank system and the boards of directors of each regional Federal Home Loan Bank. Any advancesfrom a Federal Home Loan Bank must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose ofproviding funds for residential housing finance. As a member of the Federal Home Loan Bank of Dallas, Origin Bank is required to acquire and hold shares ofcapital stock in the Federal Home Loan Bank of Dallas. All loans, advances and other extensions of credit made by the Federal Home Loan Bank of Dallas toOrigin Bank are secured by a portion of the respective mortgage loan portfolio, certain other investments and the capital stock of the Federal Home LoanBank of Dallas held by Origin Bank.Enforcement Powers. The bank regulatory agencies have broad enforcement powers, including the power to terminate deposit insurance and imposesubstantial fines and other civil and criminal penalties. Failure to comply with applicable laws, regulations and supervisory agreements, breaches of fiduciaryduty or the maintenance of unsafe and unsound conditions or practices could subject us or our subsidiaries, including Origin Bank, as well as their respectiveofficers, directors, and other institution-affiliated parties, to administrative sanctions and potentially substantial civil money penalties.FDIC Conservatorship or Receivership. The bank regulatory agencies may appoint the FDIC as conservator or receiver for a bank (or the FDIC mayappoint itself, under certain circumstances) if any one or more of a number of circumstances exist, including, without limitation, the fact that the bank isundercapitalized and has no reasonable prospect of becoming adequately capitalized, fails to become adequately capitalized when required to do so, fails tosubmit a timely and acceptable capital restoration plan or materially fails to implement an accepted capital restoration plan.Effect of Governmental Monetary Policies The commercial banking business is affected not only by general economic conditions but also by U.S.fiscal policy and the monetary policies of the Federal Reserve. Some of the instruments of monetary policy available to the Federal Reserve include changesin the discount rate on member bank borrowings, the fluctuating availability of borrowings at the "discount window," open market operations, the impositionof and changes in reserve requirements against member banks' deposits and certain borrowings by banks and their affiliates and assets of foreign branches.These policies influence to a significant extent the overall growth of bank loans, investments, and deposits and the interest rates charged on loans or paid ondeposits. We cannot predict the nature of future fiscal and monetary policies or the effect of these policies on our operations and activities, financialcondition, results of operations, growth plans or future prospects.Impact of Current Laws and RegulationsThe cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus has anegative impact on our profitability. There has also been a notable expansion in recent years of financial service providers that are not subject to theexamination, oversight, and other rules and regulations to which we are subject. Those providers, because they are not so highly regulated, may have acompetitive advantage over us and may continue to draw large amounts of funds away from traditional banking institutions, with a continuing adverse effecton the banking industry in general.Future Legislation and Regulatory Reform In light of current conditions and the market outlook for continuing weak economic conditions,regulators have increased their focus on the regulation of financial institutions. From time to time, various legislative and regulatory initiatives areintroduced in Congress and state legislatures. New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering thestructures, regulations and competitive18relationships of financial institutions operating in the United States. We cannot predict whether or in what form any proposed regulation or statute will beadopted or the extent to which our business may be affected by any new regulation or statute. Future legislation, regulation and policies, and the effects ofthat legislation and regulation and those policies, may have a significant influence on our operations and activities, financial condition, results of operations,growth plans or future prospects and the overall growth and distribution of loans, investments and deposits. Such legislation, regulation and policies havehad a significant effect on the operations and activities, financial condition, results of operations, growth plans and future prospects of commercial banks inthe past and are expected to continue to do so.Item 1A. Risk FactorsWe face many risks and uncertainties, any one or more of which could have a material adverse effect on our business, results of operations,financial condition, prospects or the value of, or return on, an investment in our common stock. You should carefully consider the risks described below,together with all other information included and incorporated by reference in this report, including our consolidated financial statements and the relatednotes contained in Item 8 of this report. We believe the risks described below are material to us as of the date of this report but these risks are not the onlyrisks that we face. Our business, financial condition, results of operations and prospects could also be affected by additional risks that apply to allfinancial services companies or companies operating in the United States and our specific geographic markets, as well as other risks that are not currentlyknown to us or that we currently consider to be immaterial to our business, financial condition, results of operations and prospects. If any of these risksactually occur, our business, results of operations, financial condition and prospects could be adversely affected. Further, to the extent that any of theinformation in this report constitutes forward-looking statements, the risk factors below also are cautionary statements identifying important factors thatcould cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf.Risks Related to Our BusinessWe may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.Our business depends on our ability to successfully measure and manage credit risk. As a lender, we are exposed to the risk that the principal of, orinterest on, a loan will not be repaid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstandingexposure. In addition, we are exposed to risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting,risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual loans and borrowers. The creditworthiness ofa borrower is affected by many factors including local market conditions and general economic conditions. If the overall economic climate in the U.S.,generally, or our market areas, specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateralwe hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs and delinquencies could rise and require significantadditional provisions for credit losses. Additional factors related to the credit quality of commercial loans include the quality of the management of thebusiness and the borrower's ability both to properly evaluate changes in the supply and demand characteristics affecting our market for products and servicesand to effectively respond to those changes. Additional factors related to the credit quality of commercial real estate loans include tenant vacancy rates andthe quality of management of the property.Our risk management practices, such as monitoring the concentration of our loans within specific industries and our credit approval, review andadministrative practices may not adequately reduce credit risk, and our credit administration personnel, policies and procedures may not adequately adapt tochanges in economic or any other conditions affecting customers and the quality of the loan portfolio. A failure to effectively measure and limit the creditrisk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly increaseour allowance for credit losses, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have anadverse effect on our business, financial condition and results of operations.As a business operating in the financial services industry, adverse conditions in the general business or economic environment could have amaterial adverse effect on our financial condition and results of operations.Our business and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in theform of deposits and investing in securities, are sensitive to general business and economic conditions in the U.S. Uncertainty about the federal fiscalpolicymaking process, and the medium and long-term fiscal outlook of the federal government and U.S. economy, is a concern for businesses, consumers andinvestors in the U.S. In addition, economic conditions in foreign countries, including global political hostilities and uncertainty over the stability of19the euro currency, could affect the stability of global financial markets, which could hinder domestic economic growth. The current economic environment ischaracterized by interest rates at historically low levels, which impacts our ability to attract deposits and to generate attractive earnings through ourinvestment portfolio and we are unable to predict changes in market interest rates. All of these factors are detrimental to our business, and the interplaybetween these factors can be complex and unpredictable. Our business is also significantly affected by monetary and related policies of the U.S. governmentand its agencies. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control. Adverseeconomic conditions and government policy responses to such conditions could have a material adverse effect on our business, financial condition, results ofoperations and prospects.Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate valuesand liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.Real estate values in many Louisiana, Texas and Mississippi markets have experienced periods of fluctuation over the last five years, and the marketvalue of real estate can fluctuate significantly in a short period of time. As of December 31, 2018, $2.29 billion, or 60.4%, of our total loans was comprised ofloans with real estate as a primary component of collateral. We also make loans secured by real estate as a supplemental source of collateral. Adverse changesaffecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, andcould result in losses that adversely affect our business, financial condition, and results of operation. Negative changes in the economy affecting real estatevalues and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell thecollateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which couldresult in losses on such loans. Such declines and losses could have an adverse effect on our business, financial condition and results of operations. If realestate values decline, it is also more likely that we would be required to increase our allowance for loan losses, which could have an adverse effect on ourbusiness, financial condition and results of operations.We rely heavily on our executive management team and other key employees, and the loss of any these individuals could adversely impact ourbusiness or reputation.Our success depends in large part on the performance of our key personnel, as well as on our ability to attract, motivate and retain highly qualifiedsenior and middle management and other skilled employees. Competition for employees is intense, and the process of locating key personnel with thecombination of skills and attributes required to execute our business plan may be lengthy. We may not be successful in retaining our key employees, and theunexpected loss of services of one or more of our key personnel could have an adverse effect on our business because of their skills, knowledge of ourprimary markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel. If the services of any of our keypersonnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, or at all, whichcould have an adverse effect on our business, financial condition and results of operations.Our ability to attract and retain profitable bankers is critical to the success of our business strategy.Our ability to retain and grow our loans, deposits and fee income depends upon the business generation capabilities, reputation and relationshipmanagement skills of our bankers. If we were to lose the services of any of our bankers, including profitable bankers employed by banks that we may acquire,to a new or existing competitor or otherwise, we may not be able to retain valuable relationships and some of our customers could choose to use the servicesof a competitor instead of our services.Our growth strategy also relies on our ability to attract and retain additional profitable bankers. We may face difficulties in recruiting and retainingbankers of our desired caliber, including as a result of competition from other financial institutions. In particular, many of our competitors are significantlylarger with greater financial resources, and may be able to offer more attractive compensation packages and broader career opportunities. Additionally, wemay incur significant expenses and expend significant time and resources on training, integration and business development before we are able to determinewhether a new banker will be profitable or effective. If we are unable to attract and retain profitable bankers, or if our bankers fail to meet our expectations interms of customer relationships and profitability, we may be unable to execute our business strategy, which could have an adverse effect on our business,financial condition and results of operations.20The geographic concentration of our markets in Texas, Louisiana and Mississippi makes us more sensitive than our more geographicallydiversified competitors to adverse changes in the local economy.Unlike larger financial institutions that are more geographically diversified, we are a regional banking franchise concentrated in the Interstate 20Corridor between the Dallas/Fort Worth metropolitan area and Jackson, Mississippi, as well as in Houston, Texas. As of December 31, 2018, 51.4% of ourtotal loans (by dollar amount) were made to borrowers who reside or conduct business in Texas, 31.5% attributable to Louisiana and 17.1% attributable toMississippi, and substantially all of our real estate loans are secured by properties located in these states. A deterioration in local economic conditions or inthe residential or commercial real estate markets could have an adverse effect on the quality of our portfolio, the demand for our products and services, theability of borrowers to timely repay loans, and the value of the collateral securing loans. If the population, employment or income growth in one of ourmarkets is negative or slower than projected, income levels, deposits and real estate development could be adversely impacted. Some of our largercompetitors that are more geographically diverse may be better able to manage and mitigate risks posed by adverse conditions impacting only local orregional markets.Our commercial real estate loan portfolio exposes us to risks that may be greater than the risks related to our other mortgage loans.Our loan portfolio includes non-owner-occupied commercial real estate loans for individuals and businesses for various purposes, which are securedby commercial properties, as well as real estate construction and development loans. As of December 31, 2018, our non-owner-occupied commercial realestate loans totaled $779.5 million, or 20.4%, of our total loan portfolio. These loans typically involve repayment dependent upon income generated, orexpected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adverselyaffected by changes in the economy or local market conditions. These loans expose us to greater credit risk than loans secured by residential real estatebecause the collateral securing these loans typically cannot be liquidated as easily as residential real estate because there are fewer potential purchasers of thecollateral. Additionally, non-owner-occupied commercial real estate loans generally involve relatively large balances to single borrowers or related groups ofborrowers. Accordingly, charge-offs on non-owner-occupied commercial real estate loans may be larger on a per loan basis than those incurred with ourresidential or consumer loan portfolios. Unexpected deterioration in the credit quality of our commercial real estate loan portfolio would require us toincrease our provision for loan losses, which would reduce our profitability, and could materially adversely affect our business, financial condition andresults of operations.A large portion of our loan portfolio is comprised of commercial loans secured by receivables, inventory, equipment or other commercialcollateral, the deterioration in value of which could expose us to credit losses.As of December 31, 2018, approximately $1.27 billion, or 33.6%, of our total loans were commercial loans to businesses. In general, these loans arecollateralized by general business assets, including, among other things, accounts receivable, inventory and equipment and most are backed by a personalguaranty of the borrower or principal. These commercial loans are typically larger in amount than loans to individuals and, therefore, have the potential forlarger losses on a single loan basis. Additionally, the repayment of commercial loans is subject to the ongoing business operations of the borrower. Thecollateral securing such loans generally includes movable property, such as equipment and inventory, which may decline in value more rapidly than weanticipate, exposing us to increased credit risk. In addition, a portion of our customer base, including customers in the energy and real estate business, may beexposed to volatile businesses or industries which are sensitive to commodity prices or market fluctuations, such as energy prices. Accordingly, negativechanges in commodity prices and real estate values and liquidity could impair the value of the collateral securing these loans. Significant adverse changes inthe economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the valuesassociated with general business assets resulting in inadequate collateral coverage that may expose us to credit losses and could adversely affect our business,financial condition and results of operations.Our loan portfolio contains a number of large loans to certain borrowers, and deterioration in the financial condition of these borrowers couldhave a significant adverse impact on our asset quality.Our growth over the past several years has been partially attributable to our ability to originate and retain relatively large loans given our asset size.As of December 31, 2018, the size of our average loan held for investment was approximately $325,000. Further, as of December 31, 2018, our 20 largestborrowing relationships, excluding mortgage loans held for sale, represented 17.3% of our outstanding loan portfolio, and 10.0% of our total commitments toextend credit. Along with other risks inherent in our loans, such as the deterioration of the underlying businesses or property securing these21loans, the higher average size of our loans presents a risk to our lending operations. If any of our largest borrowers become unable to repay their loanobligations as a result of economic or market conditions or personal circumstances, our nonperforming loans and our provision for loan losses could increasesignificantly, which could have an adverse effect on our business, financial condition and results of operations.Our allowance for loan losses may prove to be insufficient to absorb losses inherent in our loan portfolio and our earnings could decrease.Our experience in the banking industry indicates that some portion of our loans will not be fully repaid in a timely manner or at all. Accordingly, wemaintain an allowance for loan losses that represents management's judgment of probable losses and risks inherent in our loan portfolio. The level of theallowance reflects management's continuing evaluation of general economic conditions, diversification and seasoning of the loan portfolio, historic lossexperience, identified credit problems, delinquency levels and adequacy of collateral. The determination of the appropriate level of the allowance for loanlosses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risks and future trends, all ofwhich may undergo material changes. Inaccurate management assumptions, deterioration of economic conditions affecting borrowers, new informationregarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require us to increase ourallowance for loan losses and additional expenses may be incurred. At any time, we are likely to have loans in our portfolio that will result in losses but thathave not been identified as nonperforming or potential problem credits. We cannot be certain that we will be able to identify deteriorating credits before theybecome nonperforming assets or that we will be able to limit or correctly estimate losses on those loans that are identified. In addition, our regulators, as anintegral part of their periodic examination, review the adequacy of our allowance for loan losses and may direct us to make additions to the allowance basedon their judgments about information available to them at the time of their examination. Changes in economic conditions or individual business or personalcircumstances affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within andoutside of our control, may require an increase in the allowance. Further, if actual charge-offs in future periods exceed the amounts allocated to the allowancefor loan losses, we may need additional provision for loan losses to restore the adequacy of our allowance for loan losses. If we are required to materiallyincrease our level of allowance for loan losses for any reason, such increases could have an adverse effect on our business, financial condition and results ofoperations.We may have exposure to tax liabilities that are larger than we anticipate.The tax laws applicable to our business activities are subject to interpretation and may change over time. From time to time, legislative initiatives,such as corporate tax rate changes, which may impact our effective tax rate and could adversely affect our deferred tax assets or our tax positions or liabilities,may be enacted. The taxing authorities in the jurisdictions in which we operate may challenge our tax positions, which could increase our effective tax rateand harm our financial position and results of operations. In addition, our future income taxes could be adversely affected by earnings being higher thananticipated in jurisdictions that have higher statutory tax rates or by changes in tax laws, regulations or accounting principles. We are subject to audit andreview by U.S. federal and state tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our financial position andresults of operations. In addition, the determination of our provision for income taxes and other liabilities requires significant judgment by management.Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and couldhave a material adverse effect on our financial results in the period or periods for which such determination is made.The small to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair ourborrowers' ability to repay loans.We focus our business development and marketing strategy primarily on small to medium-sized businesses. Small to medium-sized businessesfrequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital toexpand or compete and may experience substantial volatility in operating results, any of which may impair a borrower's ability to repay a loan. In addition,the success of a small and medium-sized business often depends on the management skills, talents and efforts of one or two people or a small group of people,and the death, disability or resignation of one or more of these people could have an adverse impact on the business and its ability to repay its loan. If generaleconomic conditions negatively impact the markets in which we operate and small to medium-sized businesses are adversely affected or our borrowers areotherwise harmed by adverse business developments, this, in turn, could have an adverse effect on our business, financial condition and results of operations.22We face significant competition to attract and retain customers, which could impair our growth, decrease our profitability or result in loss ofmarket share.We operate in the highly competitive banking industry and face significant competition for customers from bank and non-bank competitors,particularly regional and nationwide institutions, in originating loans, attracting deposits and providing other financial services. Our competitors aregenerally larger and may have significantly more resources, greater name recognition, and more extensive and established branch networks or geographicfootprints than we do. Because of their scale, many of these competitors can be more aggressive than we can on loan and deposit pricing. Also, many of ournon-bank competitors have fewer regulatory constraints and may have lower cost structures. We expect competition to continue to intensify due to financialinstitution consolidation; legislative, regulatory and technological changes; and the emergence of alternative banking sources.Our ability to compete successfully will depend on a number of factors, including, among other things:•our ability to develop, maintain and build long-term customer relationships based on top quality service, high ethical standards and safe,sound assets;•our scope, relevance and pricing of products and services offered to meet customer needs and demands;•the rate at which we introduce new products and services relative to our competitors;•customer satisfaction with our level of service;•our ability to expand our market position;•industry and general economic trends; and•our ability to keep pace with technological advances and to invest in new technology.Increased competition could require us to increase the rates we pay on deposits or lower the rates we offer on loans, which could reduce ourprofitability. Our failure to compete effectively in our primary markets could cause us to lose market share and could have an adverse effect on our business,financial condition and results of operations.Our ability to maintain our reputation is critical to the success of our business.Our business plan emphasizes relationship banking. We have benefited from strong relationships with and among our customers. As a result, ourreputation is one of the most valuable components of our business. Our growth over the past several years has depended on attracting new customers fromcompeting financial institutions and increasing our market share, primarily by the involvement in our primary markets and word-of-mouth advertising, ratherthan on growth in the market for banking services in our primary markets. As such, we strive to enhance our reputation by recruiting, hiring and retainingemployees who share our core values of being an integral part of the communities we serve and delivering superior service to our customers. If our reputationis negatively affected by the actions of our employees or otherwise, our existing relationships may be damaged. We could lose some of our existingcustomers, including groups of large customers who have relationships with each other, and we may not be successful in attracting new customers. Any ofthese developments could have an adverse effect on our business, financial condition and results of operations.Our business has grown rapidly, and we may not be able to maintain our historical rate of growth, which could have an adverse effect on ourability to successfully implement our business strategy.Our business has grown rapidly. Financial institutions that grow rapidly can experience significant difficulties as a result of rapid growth.Furthermore, our primary strategy focuses on organic growth, supplemented by acquisitions of banking teams or other financial institutions. We may beunable to execute on aspects of our growth strategy to sustain our historical rate of growth or we may be unable to grow at all. More specifically, we may beunable to generate sufficient new loans and deposits within acceptable risk and expense tolerances, obtain the personnel or funding necessary for additionalgrowth or find suitable banking teams or acquisition candidates. Various factors, such as economic conditions and competition, may impede or prohibit thegrowth of our operations, the opening of new branches, and the consummation of acquisitions. Further, we may be unable to attract and retain experiencedbankers, which could adversely affect our growth. The success of our strategy also depends on our ability to effectively manage growth, which is dependentupon a number of factors, including our ability to adapt existing credit, operational, technology and governance infrastructure to accommodate expandedoperations. If we fail to build infrastructure sufficient to support rapid growth or fail to implement one or more23aspects of our strategy, we may be unable to maintain historical earnings trends, which could have an adverse effect on our business, financial condition andresults of operations.We may not be able to manage the risks associated with our anticipated growth and expansion through de novo branching.Our business strategy includes evaluating strategic opportunities to grow through de novo branching, and we believe that banking locationexpansion has been meaningful to our growth since inception. De novo branching carries with it certain potential risks, including significant startup costsand anticipated initial operating losses; an inability to gain regulatory approval; an inability to secure the services of qualified senior management to operatethe de novo banking location and successfully integrate and promote our corporate culture; poor market reception for de novo banking locations establishedin markets where we do not have a preexisting reputation; challenges posed by local economic conditions; challenges associated with securing attractivelocations at a reasonable cost; and the additional strain on management resources and internal systems and controls. Failure to adequately manage the risksassociated with our anticipated growth through de novo branching could have an adverse effect on our business, financial condition and results ofoperations.Our financial condition and results of operations may be adversely affected by changes in accounting policies, standards and interpretations.The Financial Accounting Standards Board ("FASB") and other bodies that establish accounting standards periodically change the financialaccounting and reporting standards governing the preparation of our financial statements. Additionally, those bodies that establish and interpret theaccounting standards (such as the FASB, SEC and banking regulators) may change prior interpretations or positions on how these standards should beapplied. Changes resulting from these new standards may result in materially different financial results and may require that we change how we process,analyze and report financial information and that we change financial reporting controls.In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The adoption of the ASU 2016-13 could result in an increase in the allowance for loan losses as aresult of changing from an "incurred loss" model, which encompasses allowances for current known and inherent losses within the portfolio, to an "expectedloss" model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate theestablishment of an allowance for expected credit losses for certain debt securities and other financial assets. The change in methodology may result inmaterial changes in the Company's accounting for credit losses on financial instruments and create more volatility in the Company's level of allowance forloan losses. If the Company is required to materially increase its level of allowance for loan losses for any reason, such increase could adversely affect itsbusiness, financial condition, and results of operations.We may pursue acquisitions in the future, which could expose us to financial, execution and operational risks.Although we plan to continue to grow our business organically, we may from time to time consider acquisition opportunities that we believecomplement our activities and have the ability to enhance our profitability. Our acquisition activities could be material to our business and involve a numberof risks, including those associated with:•the identification of suitable candidates for acquisition;•the diversion of management attention from the operation of our existing business to identify, evaluate and negotiate potential transactions;•the ability to attract funding to support additional growth within acceptable risk tolerances;•the use of inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the targetinstitution or assets;•the ability to maintain asset quality;•the adequacy of due diligence and the potential exposure to unknown or contingent liabilities related to the acquisition;•the retention of customers and key personnel, including bankers;24•the timing and uncertainty associated with obtaining necessary regulatory approvals;•the incurrence of an impairment of goodwill associated with an acquisition and adverse effects on our results of operations;•the ability to successfully integrate acquired businesses; and•the maintenance of adequate regulatory capital.The market for acquisition targets is highly competitive, which may adversely affect our ability to find acquisition candidates that fit our strategyand standards at acceptable prices. We face significant competition in pursuing acquisition targets from other banks and financial institutions, many of whichpossess greater financial, human, technical and other resources than we do. Our ability to compete in acquiring target institutions will depend on ouravailable financial resources to fund the acquisitions, including the amount of cash and cash equivalents we have and the liquidity and value of our commonstock. In addition, increased competition may also drive up the acquisition consideration that we will be required to pay in order to successfully capitalize onattractive acquisition opportunities. To the extent that we are unable to find suitable acquisition targets, an important component of our growth strategy maynot be realized.Acquisitions of financial institutions also involve operational risks and uncertainties, such as unknown or contingent liabilities with no availablemanner of recourse, exposure to unexpected problems such as asset quality, the retention of key employees and customers, and other issues that couldnegatively affect our business. We may not be able to complete future acquisitions or, if completed, we may not be able to successfully integrate theoperations, technology platforms, management, products and services of the entities that we acquire or to realize our attempts to eliminate redundancies. Theintegration process may also require significant time and attention from our management that would otherwise be directed toward servicing existing businessand developing new business. Failure to successfully integrate the entities we acquire into our existing operations in a timely manner may increase ouroperating costs significantly and could have an adverse effect on our business, financial condition and results of operations. Further, acquisitions typicallyinvolve the payment of a premium over book and market values and, therefore, some dilution of our book value and net income per common share may occurin connection with any future acquisition, and the carrying amount of any goodwill that we currently maintain or may acquire may be subject to impairmentin future periods.The markets in which we operate are susceptible to hurricanes and other natural disasters and adverse weather, which could result in a disruptionof our operations and increases in loan losses.A significant portion of our business is generated from markets that have been, and may continue to be, damaged by major hurricanes, floods,tropical storms, tornadoes and other natural disasters and adverse weather. Natural disasters can disrupt our operations, cause widespread property damage,and severely depress the local economies in which we operate. If the economies in our primary markets experience an overall decline as a result of a naturaldisaster, adverse weather, or other disaster, demand for loans and our other products and services could be reduced. In addition, the rates of delinquencies,foreclosures, bankruptcies and loan losses may increase substantially, as uninsured property losses or sustained job interruption or loss may materially impairthe ability of borrowers to repay their loans. Moreover, the value of real estate or other collateral that secures the loans could be materially and adverselyaffected by a disaster. A disaster could, therefore, result in decreased revenue and loan losses that could have an adverse effect on our business, financialcondition and results of operations.New lines of business, products, product enhancements or services may subject us to additional risks.From time to time, we implement new lines of business, or offer new products and product enhancements as well as new services within our existinglines of business, and we will continue to do so in the future. There are substantial risks and uncertainties associated with these efforts, particularly ininstances where the markets are not fully developed. In implementing, developing or marketing new lines of business, products, product enhancements orservices, we may invest significant time and resources, although we may not assign the appropriate level of resources or expertise necessary to make thesenew lines of business, products, product enhancements or services successful or to realize their expected benefits. Further, initial timetables for theintroduction and development of new lines of business, products, product enhancements or services may not be achieved, and price and profitability targetsmay not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact theultimate implementation of a new line of business or offerings of new products, product enhancements or services. Furthermore, any new line of business,product, product enhancement or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfullymanage these risks in the development and implementation of new lines of business or25offerings of new products, product enhancements or services could have an adverse impact on our business, financial condition or results of operations.We are dependent on the use of data and modeling in our management's decision-making and faulty data or modeling approaches couldnegatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.The use of statistical and quantitative models and other quantitative analyses is endemic to bank decision-making, and the employment of suchanalyses is becoming increasingly widespread in our operations. Liquidity stress testing, interest rate sensitivity analysis, and the identification of possibleviolations of anti-money laundering regulations are all examples of areas in which we are dependent on models and the data that underlies them. The use ofstatistical and quantitative models is also becoming more prevalent in regulatory compliance. While we are not currently subject to annual Dodd-Frank Actstress testing and the Comprehensive Capital Analysis and Review submissions, we currently utilize stress testing for capital, credit and liquidity purposesand anticipate that model-derived testing may become more extensively implemented by regulators in the future.We anticipate data-based modeling will penetrate further into bank decision-making, particularly risk management efforts, as the capacitiesdeveloped to meet rigorous stress testing requirements are able to be employed more widely and in differing applications. While we believe thesequantitative techniques and approaches improve our decision-making, they also create the possibility that faulty data or flawed quantitative approachescould negatively impact our decision-making ability or, if we become subject to regulatory stress-testing in the future, adverse regulatory scrutiny. We seekto mitigate this risk by performing back-testing to analyze the accuracy of these techniques and approaches. Secondarily, because of the complexity inherentin these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making.We may be required to repurchase mortgage loans in some circumstances, which could diminish our liquidity.Historically, we have originated whole mortgage loans for sale in the secondary market. When mortgage loans are sold in the secondary market, weare required to make customary representations and warranties to the purchasers about the mortgage loans and the manner in which they were originated. Themortgage loan sale agreements require us to repurchase or substitute mortgage loans or indemnify buyers against losses, in the event we breach theserepresentations and warranties. In addition, we may be required to repurchase mortgage loans as a result of early payment default of the borrower on amortgage loan. With respect to loans that are originated by us through our broker or correspondents, the remedies available against the originating broker orcorrespondent, if any, may not be as broad as the remedies available to a purchaser of mortgage loans against us or the originating broker or correspondent, ifany, may not have the financial capacity to perform remedies that otherwise may be available. Therefore, if a purchaser enforces their remedies against us, wemay not be able to recover losses from the originating broker or correspondent. If repurchase and indemnity demands increase and such demands are validclaims, it could diminish our liquidity, which could have an adverse effect on our business, financial condition and results of operations. We were notrequired to repurchase any material amount of mortgage loans sold into the secondary market during 2018, 2017 or 2016, although we were subject to andsettled a material indemnification claim in the third quarter of 2017 related to loans sold into the secondary market by an entity we acquired in 2011.Interest rate shifts could reduce net interest income.The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, ourearnings and cash flows depend to a great extent upon the level of our net interest income, or the difference between the interest income we earn on loans,investments and other interest-earning assets, and the interest we pay on interest-bearing liabilities, such as deposits and borrowings. Changes in interest ratescan increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interestrate changes. When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in the same period, anincrease in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree thaninterest-bearing liabilities, falling interest rates could reduce net interest income. As of December 31, 2018, $2.27 billion, or 50.4%, of our interest-earningassets and $2.08 billion, or 63.8%, of our interest-bearing liabilities were variable rate, which indicates that we expect our variable rate assets to reprice morequickly than our variable rate liabilities. Our interest sensitivity profile was asset sensitive as of December 31, 2018, meaning that we estimate our net interestincome would increase from rising interest rates and decline with falling interest rates.26Additionally, an increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans and decrease loanrepayment rates. A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio andincreased competition for deposits. Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan originationvolume, loan portfolio and our overall results. Although our asset-liability management strategy is designed to control and mitigate exposure to the risksrelated to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies,inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.Changes in interest rates may change the value of our mortgage servicing rights portfolio, which may increase the volatility of our earnings.As a result of our mortgage servicing business, we have a portfolio of mortgage servicing rights on unpaid principal balances of $2.08 billion atDecember 31, 2018. A mortgage servicing right is the right to service a mortgage loan - collect principal, interest and escrow amounts - for a fee. We measureand carry our entire residential mortgage servicing rights using the fair value measurement method. Fair value is determined as the present value of estimatedfuture net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers.The primary risk associated with mortgage servicing rights is that in a declining interest rate environment, they will likely lose a substantial portionof their value as a result of higher than anticipated prepayments. Moreover, if prepayments are greater than expected, the cash we receive over the life of themortgage loans would be reduced. Conversely, these assets generally increase in value in a rising interest rate environment to the extent that prepayments areslower than previously estimated. An increase in the size of our mortgage servicing rights portfolio may increase our interest rate risk. At December 31, 2018,our mortgage servicing rights had a fair value of $25.1 million, compared to $24.2 million at December 31, 2017. Changes in fair value of our mortgageservicing rights are recorded to earnings in each period. Depending on the interest rate environment, it is possible that the fair value of our mortgageservicing rights may be reduced in the future. If such changes in fair value significantly reduce the carrying value of our mortgage servicing rights, ourbusiness, financial condition and results of operations could be adversely affected.A lack of liquidity could impair our ability to fund operations.Liquidity is essential to our business, and we monitor our liquidity and manage our liquidity risk at the holding company and bank levels. We relyon our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, toensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, the sale of our investment securities,the sale of loans, and other sources could have a substantial negative effect on our liquidity. Our most important source of funds is deposits. Deposit balancescan decrease when customers perceive alternative investments as providing a better risk/return tradeoff. If customers move money out of bank deposits andinto other investments such as money market funds, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our netinterest income and net income.Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities, and proceeds from the issuanceand sale of our equity and debt securities to investors. Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank of Dallas andthe Federal Home Loan Bank of Dallas. We also may borrow funds from third-party lenders, such as other financial institutions. Our access to funding sourcesin amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or thefinancial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for thefinancial services industry. Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn inour primary market area or by one or more adverse regulatory actions against us.Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, or to fulfillobligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity andcould, in turn, have an adverse effect on our business, financial condition and results of operations. In addition, because our primary asset at the holdingcompany level is the bank, our liquidity at the holding company level depends primarily on our receipt of dividends from the bank. If the bank is unable topay dividends to us for any reason, we may be unable to satisfy our holding company level obligations, which include funding operating expenses and debtservice obligations.27We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, we may not be able to maintain regulatorycompliance.We face significant capital and other regulatory requirements as a financial institution. We may need to raise additional capital in the future toprovide us with sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financingacquisitions. In addition, we, on a consolidated basis, and Origin Bank, on a stand-alone basis, must meet certain regulatory capital requirements andmaintain sufficient liquidity in such amounts as the regulators may require from time to time. Importantly, regulatory capital requirements could increasefrom current levels, which could require us to raise additional capital or reduce our operations. Even if we satisfy all applicable regulatory capital minimums,our regulators could ask us to maintain capital levels which are significantly in excess of those minimums. Our ability to raise additional capital depends onconditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, marketconditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raiseadditional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, we could be subject to enforcementactions or other regulatory consequences, which could have an adverse effect on our business, financial condition and results of operation.By engaging in derivative transactions, we are exposed to additional credit and market risk.We use interest rate swaps to help manage our interest rate risk from recorded financial assets and liabilities when they can be demonstrated toeffectively hedge a designated asset or liability and the asset or liability exposes us to interest rate risk or risks inherent in customer related derivatives. Weuse other derivative financial instruments to help manage other economic risks, such as liquidity and credit risk, including exposures that arise from businessactivities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivativefinancial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts principally related to ourfixed rate loan assets. Hedging interest rate risk is a complex process, requiring sophisticated models and routine monitoring, and is not a perfect science. As aresult of interest rate fluctuations, hedged assets and liabilities will appreciate or depreciate in market value. The effect of this unrealized appreciation ordepreciation will generally be offset by income or loss on the derivative instruments that are linked to the hedged assets and liabilities. By engaging inderivative transactions, we are exposed to credit and market risk. If the counterparty fails to perform, credit risk exists to the extent of the fair value gain in thederivative. Market risk exists to the extent that interest rates change in ways that are significantly different from what we expected when we entered into thederivative transaction. The existence of credit and market risk associated with our derivative instruments could adversely affect our net interest income and,therefore, could have an adverse effect on our business, financial condition and results of operations.The fair value of our investment securities can fluctuate due to factors outside of our control.As of December 31, 2018, the fair value of our portfolio of available for sale investment securities was approximately $575.6 million, whichincluded a net unrealized loss of approximately $3.4 million. Factors beyond our control can significantly influence the fair value of securities in ourportfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions inrespect of the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability inthe capital markets. Any of these factors, among others, could cause other-than-temporary impairments and realized or unrealized losses in future periods anddeclines in other comprehensive income, which could have an adverse effect on our business, results of operations, financial condition and future prospects.The process for determining whether impairment of a security is other-than-temporary often requires complex, subjective judgments about whether there hasbeen a significant deterioration in the financial condition of the issuer, whether management has the intent or ability to hold a security for a period of timesufficient to allow for any anticipated recovery in fair value, the future financial performance and liquidity of the issuer and any collateral underlying thesecurity, and other relevant factors.If we fail to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, we may not be ableto accurately report our financial results or prevent fraud.Ensuring that we have adequate disclosure controls and procedures, including internal control over financial reporting, in place so that we canproduce accurate financial statements on a timely basis, is costly and time-consuming and needs to be reevaluated frequently. Under applicable law, we mustprovide annual management assessments of the effectiveness of our internal control over financial reporting. Our management may conclude that our internalcontrol over financial reporting is not effective due to our failure to cure any identified material weakness or otherwise. Moreover, even if28our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may notconclude that our internal control over financial reporting is effective. In the future, our independent registered public accounting firm may not be satisfiedwith our internal control over financial reporting or the level at which our controls are documented, designed, operated or reviewed, or it may interpret therelevant requirements differently from us. In addition, during the course of the evaluation, documentation and testing of our internal control over financialreporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the SEC, for compliance with therequirements of Section 404 of the Sarbanes-Oxley Act. Any deficiencies in our internal control over financial reporting may also subject us to adverseregulatory consequences. If we fail to achieve and maintain the adequacy of our internal control over financial reporting, as these standards are modified,supplemented or amended from time to time, we may be unable to report our financial information on a timely basis, we may not be able to conclude on anongoing basis that we have effective internal control over financial reporting in accordance with applicable law, and we may suffer adverse regulatoryconsequences or violate applicable listing standards. In addition, if we fail to achieve and maintain the adequacy of our internal control over financialreporting, we could experience a loss of investor confidence in the reliability of our financial statements.Material weaknesses in our financial reporting or internal controls could result in a material misstatement in our financial statements andnegatively affect investor confidence.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection withthe preparation and audit of our consolidated financial statements for the year ended December 31, 2016, we identified a material weakness in our internalcontrol over financial reporting relating to the development of our allowance for loan losses, and we identified a material weakness in our internal controlover financial reporting relating to the determination of our accounting for income taxes. The material weakness related to our allowance for loan lossesresulted from deficient management review controls and process level controls that did not provide for timely adjustments or recognition of losses on energyloans impaired due to collateral deterioration and resulted in adjustments to our allowance for loan losses to record additional reserves and adjust qualitativefactors. The material weakness related to our accounting for income taxes resulted from inadequate controls surrounding the evaluation of deferred incometax assets and liabilities, including inadequate levels of monitoring and review, which resulted in an adjustment to our net deferred tax assets.We have implemented measures that we believe are the appropriate actions to correct the material weaknesses. These measures include, among otherthings, the establishment of a formal allowance for a loan loss review committee responsible for the review and approval of changes in modeling assumptionsand oversight of the allowance calculation process; enhancements to our allowance for loan losses model to further disaggregate our loan pools to allow forgreater precision in calculations and review based on specific risks; the enhancement of our tax provision model and the segregation of duties of preparationand review of the model; and the engagement of independent advisers to reassess the design of our internal control over financial reporting as well asadditional personnel with experience in the ongoing identification, design and implementation of internal control over financial reporting. We will continueto periodically test and update, as necessary, our internal control systems, including our financial reporting controls.While we believe these measures have mitigated the risk related to the aforementioned internal control material weaknesses, we cannot be certainthat, at some point in the future, another material weakness will not be identified or our internal control systems will not fail to detect a matter they aredesigned to prevent, and failure to remedy such material weaknesses could result in a material misstatement in our financial statements and have a materialadverse impact on our business, financial condition and results of operations. The identification of any additional material weakness could also result ininvestors losing confidence in our internal control systems and questioning our reported financial information, which, among other things, could have anegative impact on the trading price of our common stock. Additionally, we could become subject to increased regulatory scrutiny and a higher risk ofstockholder litigation, which could result in significant additional expenses and require additional financial and management resources.We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we mayexperience operational challenges when implementing new technology.The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products andservices. The effective use of technology increases efficiency and enables financial institutions to reduce costs as well as service our customers better. Ourfuture success will depend, at least in part, upon our ability to address the needs of our customers by using technology to provide products and services thatwill satisfy customer29demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our products and service offerings.We may experience operational challenges as we implement these new technology enhancements or products, which could result in us not fully realizing theanticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner.Many of our larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offeradditional or superior products compared to those that we will be able to provide, which would put us at a competitive disadvantage. Accordingly, we maylose customers seeking new technology-driven products and services to the extent we are unable to provide such products and services.We rely on third parties to provide key components of our business infrastructure, and a failure of these parties to perform for any reason coulddisrupt our operations.Third parties provide key components of our business infrastructure such as data processing, internet connections, network access, core applicationprocessing, statement production and account analysis. Our business depends on the successful and uninterrupted functioning of our information technologyand telecommunications systems and third-party servicers. The failure of these systems, or the termination of a third-party software license or serviceagreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systemsinterface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-partysystems fail or experience interruptions. Replacing vendors or addressing other issues with our third-party service providers could entail significant delay andexpense. If we are unable to efficiently replace ineffective service providers, or if we experience a significant, sustained or repeated, system failure or servicedenial, it could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and subject us to additionalregulatory scrutiny and possible financial liability, any of which could have an adverse effect on our business, financial condition and results of operations.Unauthorized access, cyber-crime and other threats to data security may require significant resources, harm our reputation, and otherwise causeharm to our business.We necessarily collect, use and hold personal and financial information concerning individuals and businesses with which we have a bankingrelationship. This information includes non-public, personally-identifiable information that is protected under applicable federal and state laws andregulations. Additionally, certain of these data processing functions are not handled by us directly, but are outsourced to third party providers. Our facilitiesand systems, and those of our third party service providers, may be vulnerable to threats to data security, security breaches, acts of vandalism and otherphysical security threats, computer viruses or compromises, ransomware attacks, misplaced or lost data, programming and/or human errors or other similarevents. Any security breach involving the misappropriation, loss or other unauthorized disclosure of our confidential business, employee or customerinformation, whether originating with us, our vendors or retail businesses, could severely damage our reputation, expose us to the risks of civil litigation andliability, require the payment of regulatory fines or penalties or undertaking of costly remediation efforts with respect to third parties affected by a securitybreach, disrupt our operations, and have a material adverse effect on our business, financial condition and results of operations.It is difficult or impossible to defend against every risk being posed by changing technologies, as well as criminal intent on committing cyber-crime.and controls employed by our information technology department and our other employees and vendors could prove inadequate Increasing sophistication ofcyber-criminals and terrorists make keeping up with new threats difficult and could result in a breach. Cyber-security risks appear to be growing and, as aresult, the cyber-resilience of banking organizations is of increased importance to federal and state banking agencies and other regulators. New or revisedlaws and regulations may significantly impact our current and planned privacy, data protection and information security-related practices, the collection, use,sharing, retention and safeguarding of consumer and employee information, and current or planned business activities. Compliance with current or futureprivacy, data protection and information security laws to which we are subject could result in higher compliance and technology costs and could restrict ourability to provide certain products and services, which could materially and adversely affect the Company's profitability. In the last few years, there havebeen an increasing number of cyber incidents, including several well-publicized cyber-attacks that targeted other U.S. companies, including financialservices companies much larger than us. These cyber incidents have been initiated from a variety of sources, including terrorist organizations and hostileforeign governments. As technology advances, the ability to initiate transactions and access data has also become more widely distributed among mobiledevices, personal computers, automated teller machines, remote deposit capture sites and similar access points, some of which are not controlled or securedby us. It is possible that we could have exposure to liability and suffer losses as a result of a security breach or cyber-attack that occurred through no fault ofthe Company. Further, the probability of a successful30cyber-attack against us or one of our third party services providers cannot be predicted. As cyber threats continue to evolve and increase, we may be requiredto spend significant additional resources to continue to modify or enhance our protective and preventative measures or to investigate and remediate anyinformation security vulnerabilities. Our systems and those of our third party vendors may also become vulnerable to damage or disruption due tocircumstances beyond our or their control, such as from catastrophic events, power anomalies or outages, natural disasters, network failures, and viruses andmalware.We are subject to environmental liability risk associated with our lending activities.In the course of our business, we may purchase real estate, or we may foreclose on and take title to real estate. As a result, we could be subject toenvironmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personalinjury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or cleanup hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. Inaddition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costsresulting from environmental contamination emanating from the property. Any significant environmental liabilities could cause an adverse effect on ourbusiness, financial condition and results of operations.We are subject to claims and litigation pertaining to intellectual property.Banking and other financial services companies, such as ours, rely on technology companies to provide information technology products andservices necessary to support their day-to-day operations. Technology companies frequently enter into litigation based on allegations of patent infringementor other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.Competitors of our vendors, or other individuals or companies, may from time to time claim to hold intellectual property sold to us by our vendors. Suchclaims may increase in the future as the financial services sector becomes more reliant on information technology vendors. The plaintiffs in these actionsfrequently seek injunctions and substantial damages.Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, wemay have to engage in protracted litigation. Such litigation is often expensive, time-consuming, disruptive to our operations and distracting to management.If we are found to infringe one or more patents or other intellectual property rights, we may be required to pay substantial damages or royalties to a thirdparty. In certain cases, we may consider entering into licensing agreements for disputed intellectual property, although no assurance can be given that suchlicenses can be obtained on acceptable terms or that litigation will not occur. These licenses may also significantly increase our operating expenses. If legalmatters related to intellectual property claims were resolved against us or settled, we could be required to make payments in amounts that could have anadverse effect on our business, financial condition and results of operations.We may be adversely affected by the soundness of other financial institutions.Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financialinstitutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to differentindustries and counterparties, and through transactions with counterparties in the financial services industry, including broker-dealers, commercial banks,investment banks, and other financial intermediaries. In addition, we participate in loans originated by other institutions, and we participate in syndicatedtransactions (including shared national credits) in which other lenders serve as the lead bank. As a result, defaults by, declines in the financial condition of, oreven rumors or questions about, one or more financial institutions, financial service companies or the financial services industry generally, may lead tomarket-wide liquidity, asset quality or other problems and could lead to losses or defaults by us or by other institutions. These problems, losses or defaultscould have an adverse effect on our business, financial condition and results of operations.31Risks Related to the Regulation of Our IndustryWe operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executivecompensation and accounting principles, or changes in them, or our failure to comply with them, could subject us to regulatory action or penalties.We are subject to extensive regulation, supervision and legal requirements that govern almost all aspects of our operations. These laws andregulations are not intended to protect our stockholders. Rather, these laws and regulations are intended to protect customers, depositors, the DepositInsurance Fund and the overall financial stability of the U.S., and not stockholders or counterparties. These laws and regulations, among other matters,prescribe minimum capital requirements, impose limitations on the business activities in which we can engage, limit the dividends or distributions thatOrigin Bank can pay to us, and that we can pay to our stockholders, and impose certain specific accounting requirements on us that may be more restrictiveand may result in greater or earlier charges to earnings or reductions in our capital than GAAP would require. Compliance with laws and regulations can bedifficult and costly, and changes to laws and regulations often impose additional compliance costs. Our failure to comply with these laws and regulations,even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and otherpenalties, any of which could adversely affect our results of operations, capital base and the price of our securities. Further, any new laws, rules andregulations could make compliance more difficult or expensive. All of these laws and regulations, and the supervisory framework applicable to our industry,could have a material adverse effect on our business, financial condition, and results of operations.We are subject to stringent capital requirements, which may result in lower returns on equity, require us to raise additional capital, limit growthopportunities or result in regulatory restrictions.Beginning January 1, 2015, we became subject to new rules designed to implement the recommendations with respect to regulatory capitalstandards, commonly known as Basel III, approved by the international Basel Committee on Banking Supervision. The rules established a new regulatorycapital standard based on common equity tier 1, increase the minimum tier 1 risk-based capital ratio, and impose a capital conservation buffer of at least 2.5%of common equity tier 1 capital above the new minimum regulatory capital ratios, when fully phased in on January 1, 2019. The rules also changed themanner in which a number of our regulatory capital components are calculated, including deferred tax assets, and the risk weights applicable to certain assetcategories. The Basel III rules generally require us to maintain greater amounts of regulatory capital than we were required to maintain prior toimplementation of such rules and may also limit or restrict how we utilize our capital. Increased regulatory capital requirements (and the associatedcompliance costs) whether due to the adoption of new laws and regulations, changes in existing laws and regulations, or more expansive or aggressiveinterpretations of existing laws and regulations, may require us to raise additional capital, or impact our ability to repurchase shares of capital stock, paydividends or pay compensation to our executives, which could have a material and adverse effect on our business, financial condition, results of operationsand the value of our common stock. If Origin Bank does not meet minimum capital requirements, it will be subject to prompt corrective action by the FederalReserve. Prompt corrective action can include progressively more restrictive constraints on operations, management and capital distributions. Failure toexceed the capital conservation buffer will result in certain limitations on dividends, capital repurchases, and discretionary bonus payments to executiveofficers. Even if we meet minimum capital requirements, it is possible that our regulators may ask us to raise additional capital.We face a risk of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations.The federal Bank Secrecy Act, USA Patriot Act of 2001 and other laws and regulations require financial institutions, among other duties, to instituteand maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federal FinancialCrimes Enforcement Network, established by the Treasury to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties forviolations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal bank regulatory agencies, as well asthe U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. Federal bank regulatory agencies and state bank regulatorsalso have begun to focus on compliance with Bank Secrecy Act and anti-money laundering regulations. If our policies, procedures and systems are deemeddeficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity toobtain regulatory approvals to proceed with certain aspects of our business plan, which would negatively impact our business, financial condition and resultsof operations.32Failure by Origin Bank to perform satisfactorily on its Community Reinvestment Act evaluations could make it more difficult for our business togrow.The performance of a bank under the Community Reinvestment Act ("CRA"), in meeting the credit needs of its community is a factor that must betaken into consideration when the federal banking agencies evaluate applications related to mergers and acquisitions, as well as branch opening andrelocations. If Origin Bank is unable to maintain at least a "Satisfactory" CRA rating, our ability to complete the acquisition of another financial institution oropen a new branch will be adversely impacted. If Origin Bank received an overall CRA rating of less than "Satisfactory", the Federal Reserve would not re-evaluate its rating until its next CRA examination, which may not occur for several more years, and it is possible that a low CRA rating would not improve inthe future.Increases in Federal Deposit Insurance Corporation insurance premiums could adversely affect our earnings and results of operations.The deposits of Origin Bank are insured by the Federal Deposit Insurance Corporation ("FDIC") up to legal limits and, accordingly, subject it to thepayment of FDIC deposit insurance assessments. The bank's regular assessments are determined by the level of its assessment base and its risk classification,which is based on its regulatory capital levels and the level of supervisory concern that it poses. Moreover, the FDIC has the unilateral power to changedeposit insurance assessment rates and the manner in which deposit insurance is calculated and also to charge special assessments to FDIC-insuredinstitutions. The FDIC utilized all of these powers during the financial crisis for the purpose of restoring the reserve ratios of the Deposit Insurance Fund. Anyfuture special assessments, increases in assessment rates or premiums, or required prepayments in FDIC insurance premiums could reduce our profitability orlimit our ability to pursue certain business opportunities, which could materially and adversely affect our business, financial condition, and results ofoperations.Risks Related to Investing in Our Common StockThe market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at thevolume, prices and times desired.The market price of our common stock may be highly volatile, which may make it difficult for you to resell your shares at the volume, prices andtimes desired. There are many factors that may impact the market price and trading volume of our common stock, including, without limitation:•actual or anticipated fluctuations in our operating results, financial condition or asset quality;•changes in economic or business conditions;•the effects of, and changes in, trade, monetary and fiscal policies, including the interest rate policies of the Federal Reserve, or in laws orregulations affecting us;•the public reaction to our press releases, our other public announcements and our filings with the SEC;•changes in accounting standards, policies, guidance, interpretations or principles;•the number of securities analysts covering us;•publication of research reports about us, our competitors, or the financial services industry generally, or changes in, or failure to meet,securities analysts' estimates of our financial and operating performance, or lack of research reports by industry analysts or ceasing ofcoverage;•changes in market valuations or earnings of companies that investors deem comparable to us;•the trading volume of our common stock;•future issuances of our common stock or other securities;•future sales of our common stock by us or our directors, executive officers or significant stockholders;•additions or departures of key personnel;•perceptions in the marketplace regarding our competitors and us;33•significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving ourcompetitors or us;•other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services;and•other news, announcements or disclosures (whether by us or others) related to us, our competitors, our core market or the financial servicesindustry.In particular, the realization of any of the risks described in this "Risk Factors" section of this report could have a material adverse effect on themarket price of our common stock and cause the value of your investment to decline. The stock market and, in particular, the market for financial institutionstocks have experienced substantial fluctuations in recent years, which in many cases have been unrelated to the operating performance and prospects ofparticular companies. In addition, significant fluctuations in the trading volume of our common stock may cause significant price variations to occur.Increased market volatility could have an adverse effect on the market price of our common stock, which could make it difficult to sell your shares at thevolume, prices and times desired.We are an "emerging growth company," and the reduced reporting requirements applicable to emerging growth companies may make ourcommon stock less attractive to investors.We are an "emerging growth company," as defined in the JOBS Act. For as long as we continue to be an emerging growth company we are eligible totake advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growthcompanies." These include, without limitation, an exemption from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reducedfinancial reporting requirements, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, andexemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachutepayments not previously approved.We could be an emerging growth company until December 31, 2023, although we could lose that status sooner if our gross revenues exceed $1.07billion, if we issue more than $1.07 billion in non-convertible debt in a three year period, or if the market value of our common stock held by non-affiliatesexceeds $700.0 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the followingDecember 31. Investors may find our common stock less attractive if we rely on these exemptions, which may result in a less active trading market andincreased volatility in our stock price.Our dividend policy may change without notice, and our future ability to pay dividends is subject to restrictions, and we may not pay dividends inthe future. We are dependent on dividends from the Bank to meet our financial obligations and pay dividends to our stockholders.Holders of our common stock are entitled to receive only such cash dividends as our board of directors may declare out of funds legally available forthe payment of dividends. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment ofdividends entirely at any time without notice to our stockholders. Our ability to pay dividends may also be limited on account of our outstandingindebtedness as we generally must make payments on our junior subordinated debentures and our outstanding indebtedness before any dividends can bepaid on our common stock.Additionally, because our primary asset is our investment in the stock of Origin Bank, we are dependent upon dividends from the bank to pay ouroperating expenses, satisfy our obligations and pay dividends on our common stock, and the bank's ability to pay dividends on its common stock willsubstantially depend upon its earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate and otherfactors deemed relevant by its board of directors. In addition, our and the Bank's ability to declare and pay dividends depends on numerous laws and bankingregulations and guidance that limit our and Origin Bank's ability to pay dividends, including the guidelines of the Federal Reserve regarding capitaladequacy and dividends. As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, thepayment of dividends on our common stock. Any change in the level of our dividends or the suspension of the payment thereof could have a material adverseeffect on the market price of our common stock.34Securities analysts may not continue coverage on us.The trading market for our common stock will depend, in part, on the research and reports that securities analysts publish about us and our business.We do not have any control over these securities analysts, and they may not continue to cover us. If one or more of these analysts cease to cover us or fail topublish regular reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.If we are covered by securities analysts and are the subject of an unfavorable report, the price of our common stock may decline.An investment in our common stock is not an insured deposit and is subject to risk of loss.Your investment in our common stock will not be a bank deposit and will not be insured or guaranteed by the FDIC or any other governmentagency. Your investment will be subject to investment risk, and you must be capable of affording the loss of your entire investment.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesAt December 31, 2018, our executive offices and those of Origin Bank were located at 500 South Service Road East, Ruston, Louisiana 71270 andwe operate through 41 banking centers in Louisiana, Texas and Mississippi. At December 31, 2018, our primary offices outside of Louisiana were located inDallas, Texas, Houston, Texas and Ridgeland, Mississippi. At December 31, 2018, Origin Bank owned its main office building and 24 of its banking centers,as well as a controlling interest in its operations center. The remaining facilities were occupied under lease agreements, terms of which range from month tomonth to 18 years. We believe that our banking and other offices are in good condition and are suitable and adequate to our needs.Item 3. Legal ProceedingsWe are subject to various legal actions that arise from time to time in the ordinary course of business. While the ultimate outcome of pendingproceedings cannot be predicted with certainty, at this time management does not expect any such proceedings, either individually or in the aggregate,would have a material adverse effect on our consolidated financial position or results of operations. However, one or more unfavorable outcomes in any legalaction against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimateoutcomes, such matters are costly, divert management's attention and may materially adversely affect our reputation, even if resolved in our favor.Item 4. Mine Safety DisclosuresNot applicable.35PART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock is listed on the Nasdaq Global Select Market under the symbol "OBNK". Our common stock began trading on the Nasdaq GlobalSelect Market on May 9, 2018. Prior to that date, there was no public trading market for our common stock.At February 19, 2019, there were approximately 1,840 holders of record of our common stock as reported by our transfer agent.We intend to pay quarterly cash dividends on our common stock, subject to approval by our board of directors. Although we expect to paydividends according to our dividend policy, we may elect not to pay dividends. Any declarations of dividends, and the amount and timing thereof, will be atthe discretion of our board of directors. In determining the amount of any future dividends, our board of directors will take into account our earnings, capitalrequirements, financial condition and any other relevant factors. The primary source for dividends paid to stockholders are dividends or capital distributionspaid to the Company from the Bank. There are regulatory restrictions on the ability of the Bank to pay dividends. Therefore, there can be no assurance thatwe will pay any dividends to holders of our stock or the amount of any such dividends. See "Item 1. Business - Regulation and Supervision" above and seeNote 16 - Capital and Regulatory Matters contained in Item 8 of this report.Equity Compensation PlansSee "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters"36Stock Performance GraphThe following graph compares the cumulative total stockholder return on our common stock to the cumulative total stockholder return for theNasdaq Composite Index and the SNL Index for U.S. Banks with net assets between $1.0 billion and $5.0 billion for the period beginning on May 9, 2018,the first day of trading of our common stock on the Nasdaq Global Select Market under the symbol "OBNK", through December 31, 2018. The followingreflects index values as of close of trading, assumes $100.00 invested on May 9, 2018, in our common stock, the Nasdaq Composite Index and the SNL Indexfor U.S. Banks, and assumes the reinvestment of dividends, if any. The historical price of our common stock represented in this graph represents pastperformance and is not necessarily indicative of future performance. May 9, 2018 June 30, 2018 September 30, 2018 December 31, 2018Origin Bancorp, Inc.$100.00 $120.51 $110.91 $100.48Nasdaq Composite Index100.00 102.32 109.62 90.40SNL Index for U.S. Banks $1B - $5B100.00 95.3 96.48 80.02Unregistered Sales of Equity Securities and Use of ProceedsOn July 1, 2018, the Company acquired substantially all of the assets of Reeves, Coon & Funderburg. The consideration paid in this transactionincluded 66,824 shares of the Company's common stock issued at the closing of the acquisition with an aggregate value of approximately $2,706,372, basedon the closing sale price of the Company's stock on the acquisition date. The Company relied on the exemption from registration available under Section 4(a)(2) of the Securities Act of 1933, as amended ("Securities Act"), as the basis for exemption from registration for this issuance. These shares were issued in aprivately negotiated transaction and not pursuant to a public solicitation. A Form D was filed on July 12, 2018.37In May 2018, the Company sold 3,045,426 shares of the Company's common stock at a public offering price of $34.00 per share in its initial publicoffering, including 545,426 shares sold in connection with the exercise of the underwriters' option to purchase additional shares, and certain sellingstockholders sold 1,136,176 shares in the offering. The offer and sale of all the shares in the initial public offering were registered under the Securities Actpursuant to a registration statement on Form S-1 (File No. 333-224225), which was declared effective by the SEC on May 8, 2018.There has been no material change in the planned use of proceeds from our initial public offering as described in the prospectus filed with the SECon May 9, 2018, pursuant to Rule 424(b)(4) under the Securities Act.Stock RepurchasesThe Company did not repurchase any of its common stock during the periods covered by this report.Item 6. Selected Financial DataThe following tables set forth certain selected historical consolidated financial data as of and for each of the years ended December 31, 2018, 2017,2016, 2015 and 2014, and is derived from our audited consolidated financial statements. You should read this information in conjunction with"Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 of this report and our consolidated financialstatements and related notes contained in Item 8 of this report.(Dollars in thousands, except per share amounts)At and for the Years Ended December 31,Statement of income data:2018 2017 2016 2015 2014Total interest income$188,096 $152,593 $139,151 $137,333 $125,923Total interest expense34,644 22,288 18,468 16,056 14,721Net interest income153,452 130,305 120,683 121,277 111,202Provision for credit losses1,014 8,336 30,078 11,610 15,946Net interest income after provision for credit losses152,438 121,969 90,605 109,667 95,256Noninterest income41,240 29,187 41,868 44,131 38,262Noninterest expense131,236 130,674 116,707 113,995 112,334Income before income taxes62,442 20,482 15,766 39,803 21,184Income tax expense10,837 5,813 2,916 10,725 3,926Net income$51,605 $14,669 $12,850 $29,078 $17,258Common stock dividends$2,937 $2,535 $2,331 $2,260 $2,250 Balance sheet data (period end): Total assets$4,821,576 $4,153,995 $4,071,455 $3,971,343 $3,734,225Securities606,174 436,753 408,738 388,400 425,887Loans, net(1)3,754,902 3,203,948 3,061,544 2,971,433 2,862,643Goodwill and other intangible assets, net32,861 24,336 24,854 26,322 23,818Noninterest-bearing deposits951,015 832,853 780,065 726,322 628,640Total deposits3,783,138 3,512,014 3,443,266 3,387,821 3,085,186Junior subordinated debentures9,644 9,619 9,596 9,574 9,737Total stockholders' equity(2)549,779 455,342 448,657 398,440 372,690SBLF preferred stock— 48,260 48,260 48,260 48,260Series D preferred stock— 16,998 16,998 15,000 15,000 38(Dollars in thousands, except per share amounts)At and for the Years Ended December 31,Statement of income data:2018 2017 2016 2015 2014Earnings per share data: Net income$51,605 $14,669 $12,850 $29,078 $17,258Preferred stock dividends1,923 4,461 4,398 636 588Net income allocated to participating stockholders1,029 377 316 1,367 704Net income available to common stockholders$48,653 $9,831 $8,136 $27,075 $15,966Common shares outstanding at end of period(3)23,726,559 19,518,752 19,483,718 17,419,680 17,396,712Weighted average common shares outstanding(3)21,995,990 19,418,278 17,545,655 17,284,100 17,227,176Weighted average diluted common shares outstanding(3)22,194,429 19,634,412 17,733,061 17,506,658 17,447,890Basic earnings per share(3)$2.21 $0.51 $0.46 $1.57 $0.93Diluted earnings per share(3)2.20 0.50 0.46 1.56 0.92 Performance ratios: Return on average assets(4)1.16% 0.36% 0.33% 0.76% 0.50%Return on average equity(4)10.07 3.19 3.11 7.49 4.72Net interest margin, fully tax equivalent(5)3.75 3.52 3.38 3.48 3.55Efficiency ratio(6)67.41 81.93 71.80 68.92 75.16Dividend payout ratio6.04 25.79 28.65 8.35 14.09 Asset quality ratios: Nonperforming assets to total assets0.75% 0.59% 1.67% 0.89% 0.56%Nonperforming loans to loans held for investment0.84 0.73 2.14 1.12 0.66Allowance for loan losses to nonperforming loans107.37 155.80 75.92 121.74 181.25Allowance for loan losses to loans held for investment0.90 1.14 1.62 1.37 1.20Net charge-offs as a percentage of average loans heldfor investment(4)0.13 0.69 0.71 0.15 0.48 Capital ratios: Book value per common share$23.17 $19.99 $19.68 $19.24 $17.79Equity to assets11.40% 10.96% 11.02% 10.03% 9.98%Tier 1 capital to average assets(4)11.21 10.53 10.67 9.79 9.78Common equity tier 1 capital to risk-weighted assets11.94 9.35 9.42 8.29 -Tier 1 capital to risk-weighted assets12.16 11.25 11.33 10.25 10.06Total capital to risk-weighted assets12.98 12.26 12.58 11.45 11.12____________________________(1) Balances are shown net of the allowance for loan losses and exclude loans held for sale.(2) Includes shares owned by our Employee Retirement Plan ("Retirement Plan") for periods prior to December 31, 2018.(3) Presentation of share and per share amounts has been adjusted to reflect a 2-for-1 stock split that occurred on October 5, 2016.(4) All average balances are calculated using average daily balances.(5) Tax equivalent yields are calculated by applying a 21% estimated tax rate to tax-exempt interest earnings for the year ended December 31, 2018, and 35% for all periods priorto December 31, 2018.(6) We calculate the efficiency ratio by dividing noninterest expense by the sum of net interest income and noninterest income. The efficiency ratio is not calculated on a fully taxequivalent basis.39Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis presents our financial condition and results of operations on a consolidated basis. However, we conduct allof our material business operations through our wholly owned bank subsidiary, Origin Bank, and the discussion and analysis that follows primarily relatesto activities conducted at the Bank level.The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained inItem 8 of this report. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not beindicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks,uncertainties and assumptions that could cause results to differ materially from management's expectations. Factors that could cause such differences arediscussed in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors." We assume no obligation to updateany of these forward-looking statements.Critical Accounting EstimatesOur consolidated financial statements are prepared in accordance with United States generally accepted accounting principles ("GAAP") and withgeneral practices within the financial services industry. Application of these principles requires management to make estimates and assumptions that affectthe amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptionsthat we believe to be reasonable under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets andliabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptionsmay have resulted in significantly different estimates. Actual results may differ from these estimates. Please refer to Note 1 - Significant Accounting Policiesto our consolidated financial statements contained in Item 8 of this report for a full discussion of our accounting policies, including estimates.We have identified the following accounting estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in thoseestimates and the potential sensitivity of the financial statements to those judgments and assumptions,40are critical to an understanding of our financial condition and results of operations. We believe that the judgments, estimates and assumptions used in thepreparation of the financial statements are appropriate.Allowance for Loan Losses. Our allowance for loan losses is established as losses are estimated to have occurred through a provision for loan lossescharged to earnings. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by managementand is based upon management's periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loanportfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, and prevailing economic conditions.This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Loans arecharged against the allowance for loan losses when management believes the loss is confirmed.Mortgage Servicing Rights. We recognize as assets the rights to service mortgage loans based on the estimated fair value of the Mortgage ServicingRight ("MSR") when loans are sold and the associated servicing rights are retained. We elected to account for the MSR at fair value.The fair value of the MSR is determined using a valuation model administered by a third party that calculates the present value of estimated futurenet servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates ofprepayment speeds, discount rate, default rates, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicingfee income and other ancillary income such as late fees. Management reviews all significant assumptions quarterly. Mortgage loan prepayment speeds, a keyassumption in the model, is the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate used to determine thepresent value of estimated future net servicing income, another key assumption in the model, is an estimate of the rate of return investors in the market wouldrequire for an asset with similar risk. Both assumptions can, and generally will, change as market conditions and interest rates change.An increase in either the prepayment speed or discount rate assumption will result in a decrease in the fair value of the MSR, while a decrease ineither assumption will result in an increase in the fair value of the MSR. In recent years, there have been significant market-driven fluctuations in loanprepayment speeds and discount rates. These fluctuations can be rapid and may continue to be significant. Therefore, estimating prepayment speed and/ordiscount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.GeneralWe are a financial holding company headquartered in Ruston, Louisiana. Through our wholly owned bank subsidiary, Origin Bank, we provide abroad range of financial services to small and medium-sized businesses, municipalities, high net worth individuals and retail clients through 41 bankingcenters in Louisiana, Texas and Mississippi. As a financial holding company operating through one segment, we generate the majority of our revenue frominterest earned on loans and investments, service charges and fees on deposit accounts.We incur interest expense on deposits and other borrowed funds and noninterest expense, such as salaries and employee benefits and occupancyexpenses. We analyze our ability to maximize income generated from interest earning assets and expense of our liabilities through our net interest margin.Net interest margin is a ratio calculated as net interest income divided by average interest-earning assets. Net interest income is the difference betweeninterest income on interest-earning assets, such as loans, securities and interest-bearing cash, and interest expense on interest-bearing liabilities, such asdeposits and borrowings.Changes in market interest rates and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as in the volumeand types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and stockholders' equity, are usually the largest drivers of periodicchanges in net interest spread, net interest margin and net interest income. Fluctuations in market interest rates are driven by many factors, includinggovernmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political andinternational conditions and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolioare affected by, among other factors, economic and competitive conditions, as well as developments affecting the real estate, technology, financial services,insurance, transportation and manufacturing sectors within our target markets.41Comparison of Results of Operations for the Years Ended December 31, 2018, 2017 and 2016Net Interest IncomeYear ended December 31, 2018, compared to year ended December 31, 2017Net interest income for the year ended December 31, 2018, was $153.5 million, an increase of $23.1 million over the year ended December 31, 2017.The increase was driven by higher yields and higher average outstanding balances in our loan portfolio. The yield earned on our loans held for investmentwas 4.96% for the year ended December 31, 2018, compared to 4.38% for the year ended December 31, 2017. Average loans held for investment totaled$3.40 billion for the year ended December 31, 2018, compared to $3.13 billion for the year ended December 31, 2017. Increases in the yield earned on loansheld for investment provided approximately $19.5 million of the increase in interest income, while average loans held for investment providedapproximately $11.6 million of the increase. Commercial and industrial and commercial real estate loans contributed a total of $20.0 million of the increase.These increases were partially offset by an increase in the cost of funding primarily driven by increases in market interest rates.The average cost of our interest-bearing liabilities increased during the year ended December 31, 2018, compared to 2017, primarily due to higheraverage savings and interest-bearing transaction account rates. The average rate paid on interest-bearing deposits was 1.10% for the year ended December 31,2018, an increase of 36 basis points from 0.74% for the year ended December 31, 2017.Year ended December 31, 2017, compared to year ended December 31, 2016Net interest income for the year ended December 31, 2017, was $130.3 million, a $9.6 million, or 8.0%, increase from $120.7 million for the yearended December 31, 2016. The increase was primarily the result of increased yields earned, and to a lesser extent, increases in the average balances in ourloan portfolio. The average yield on our loan portfolio for the year ended December 31, 2017, was 4.37%, a 27 basis point increase from 4.10% for the yearended December 31, 2016. The increase in yield earned on our loan portfolio was attributed to a mix of fewer nonperforming loans which resulted in higherinterest earned and increases in the interest rate environment during 2017, but was partially offset by increased rates for our interest-bearing liabilities. During2016, credit deterioration in our energy lending portfolio resulted in a downward impact of 15 basis points to the total yield on our loan portfolio. During2017, our energy lending portfolio resulted in a downward impact of three basis points to the total yield on our loan portfolio. In 2017, we executed on ourstrategy to manage the reduction in our energy loan portfolio through the sale of certain remaining energy loans. We had no energy loans held for sale atDecember 31, 2017, and we do not expect significant losses on energy loan sales in the future.The average cost of our interest-bearing liabilities for the year ended December 31, 2017, was 0.82%, an increase of 14 basis points from 0.68% forthe year ended December 31, 2016. The increase in the cost of interest-bearing liabilities was primarily attributed to rises in the interest rate environment,which increase our costs to retain and attract deposits. For the year ended December 31, 2017, our net interest margin increased by 14 basis points to 3.42%from 3.28% for the year ended December 31, 2016.The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields earned andrates paid for the years ended December 31, 2018, 2017 and 2016. Years Ended December 31,(Dollars in thousands)2018 2017 2016AssetsAverageBalance(1) Income/Expense Yield/Rate(2) AverageBalance(1) Income/Expense Yield/Rate(2) AverageBalance(1) Income/Expense Yield/Rate(2)Commercial real estate$1,119,184 $54,777 4.89% $1,027,495 $46,071 4.48% $954,860 $41,612 4.36%Construction/land/landdevelopment369,999 19,579 5.29 319,980 14,720 4.60 291,799 12,401 4.25Residential real estate585,545 27,331 4.67 498,271 22,227 4.46 426,748 19,476 4.56Commercial andindustrial1,100,560 54,633 4.96 1,050,464 43,291 4.12 1,181,746 44,171 3.74Mortgage warehouselines of credit199,952 10,630 5.32 215,364 9,572 4.44 183,400 7,129 3.89Consumer20,941 1,410 6.73 21,656 1,363 6.29 22,162 1,296 5.85Loans held forinvestment3,396,181 168,360 4.96 3,133,230 137,244 4.38 3,060,715 126,085 4.12Loans held for sale22,959 1,024 4.46 44,335 1,614 3.64 53,808 1,761 3.27Loans receivable3,419,140 169,384 4.95 3,177,565 138,858 4.37 3,114,523 127,846 4.10Investment securities-taxable404,280 9,843 2.43 292,161 6,233 2.13 260,960 4,970 1.90Investment securities-non-taxable124,907 4,465 3.57 135,207 4,766 3.52 138,380 4,900 3.54Non-marketable equitysecurities held in otherfinancial institutions29,615 897 3.03 19,607 734 3.74 19,240 613 3.18Interest-bearing depositsin banks177,020 3,499 1.98 179,998 2,002 1.11 146,061 822 0.56Federal funds sold329 8 2.43 — — — — — —Total interest-earningassets4,155,291 188,096 4.53 3,804,538 152,593 4.01 3,679,164 139,151 3.78Noninterest-earningassets(3)307,847 292,429 271,079 Total assets$4,463,138 $4,096,967 $3,950,243 Liabilities andStockholders' Equity Liabilities Interest-bearing liabilities Savings and interest-bearing transactionaccounts$1,996,364 19,002 0.95 $1,985,688 12,707 0.64 $1,904,480 8,707 0.46Time deposits712,913 10,669 1.50 630,770 6,607 1.05 673,774 6,543 0.97Total interest-bearingdeposits2,709,277 29,671 1.10 2,616,458 19,314 0.74 2,578,254 15,250 0.59FHLB advances & otherborrowings179,359 4,138 2.31 76,374 2,340 3.06 99,922 2,588 2.59Securities sold underagreements torepurchase32,604 282 0.86 29,276 86 0.29 29,838 84 0.28Subordinated debentures9,631 553 5.67 9,607 548 5.70 9,584 546 5.70Total interest-bearingliabilities2,930,871 34,644 1.18 2,731,715 22,288 0.82 2,717,598 18,468 0.68Noninterest-bearingdeposits948,585 841,375 758,878 Other liabilities(3)71,451 63,658 60,250 Total liabilities3,950,907 3,636,748 3,536,726 Stockholders' Equity512,231 460,219 413,517 Total liabilities andstockholders' equity$4,463,138 $4,096,967 $3,950,243 Net interest spread (4) 3.35% 3.19% 3.10%Net interest income andmargin $153,452 3.69% $130,305 3.42% $120,683 3.28%Net interest income andmargin - (tax equivalent)(5) $155,856 3.75% $133,873 3.52% $124,323 3.38%____________________________(1) Nonaccrual loans are included in their respective loan category for the purpose of calculating the yield earned. All average balances are daily average balances.(2) Yields earned and rates paid are calculated at the portfolio level using the actual number of days in the year, except for our securities, consumer real estate and held for sale loanportfolios, which are calculated using 360 days in a year. Yields earned are calculated net of deferred fees and costs.42(3) Includes Government National Mortgage Association ("GNMA") repurchase average balances of $30.1 million, $26.1 million and $15.3 million for the years ended December31, 2018, 2017 and 2016, respectively. The GNMA repurchase asset and liability are recorded as equal offsetting amounts in the consolidated balance sheets, with the assetincluded in loans held for sale and the liability included in FHLB advances and other borrowings. For more information on the GNMA repurchase option, see Note 8 -Mortgage Banking in the notes to our consolidated financial statements.(4) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.(5) In order to present pre-tax income and resulting yields on tax-exempt investments comparable to those on taxable investments, a tax-equivalent adjustment has been computed.This adjustment also includes income tax credits received on Qualified School Construction Bonds. Income from tax-exempt investments and tax credits were computed usinga Federal income tax rate of 21% for the year ended December 31, 2018, and 35% for the years ended December 31, 2017 and 2016. The tax-equivalent net interest marginwould have been 3.49% and 3.35% for the years ended December 31, 2017 and 2016, respectively, if we had been subject to the 21% Federal income tax rate enacted for2018, in the Tax Cuts and Jobs Act.Rate/Volume AnalysisThe following tables present the dollar amount of changes in interest income and interest expense for major components of interest-earning assetsand interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and those due to changes in interest rates. The change ininterest attributable to rate changes has been determined by applying the change in rate between periods to average balances outstanding in the earlierperiod. The change in interest due to volume has been determined by applying the rate from the earlier period to the change in average balances outstandingbetween periods. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.(Dollars in thousands)Year Ended December 31, 2018 vs. Year Ended December 31, 2017Interest-earning assetsIncrease (Decrease) due to Change in Loans:Volume Yield/Rate Total ChangeCommercial real estate$4,111 $4,595 $8,706Construction/land/land development2,301 2,558 4,859Residential real estate3,893 1,211 5,104Commercial and industrial2,065 9,277 11,342Mortgage warehouse lines of credit(685) 1,743 1,058Consumer(45) 92 47Loans held for sale(778) 188 (590)Loans receivable10,862 19,664 30,526Investment securities-taxable2,392 1,218 3,610Investment securities-non-taxable(363) 62 (301)Non-marketable equity securities held in other financial institutions374 (211) 163Interest-bearing deposits in banks(33) 1,530 1,497Federal funds sold— 8 8Total interest-earning assets13,232 22,271 35,503Interest-bearing liabilities Savings and interest-bearing transaction accounts68 6,227 6,295Time deposits860 3,202 4,062FHLB advances & other borrowings3,156 (1,358) 1,798Securities sold under agreements to repurchase10 186 196Junior subordinated debentures1 4 5Total interest-bearing liabilities4,095 8,261 12,356Net interest income$9,137 $14,010 $23,14743(Dollars in thousands)Year Ended December 31, 2017 vs. Year Ended December 31, 2016Interest-earning assetsIncrease (Decrease) due to Change in Loans:Volume Yield/Rate Total ChangeCommercial real estate$3,166 $1,291 $4,457Construction/land/land development1,198 1,121 2,319Residential real estate3,261 (508) 2,753Commercial and industrial(4,907) 4,027 (880)Mortgage warehouse lines of credit1,242 1,201 2,443Consumer(30) 97 67Loans held for sale(310) 163 (147)Loans receivable3,620 7,392 11,012Investment securities-taxable594 669 1,263Investment securities-non-taxable(112) (22) (134)Non-marketable equity securities held in other financial institutions12 109 121Interest-bearing deposits in banks191 989 1,180Total interest-earning assets4,305 9,137 13,442Interest-bearing liabilities Savings and interest-bearing transaction accounts371 3,629 4,000Time deposits(418) 482 64FHLB advances & other borrowings(610) 362 (248)Securities sold under agreements to repurchase(2) 4 2Junior subordinated debentures1 1 2Total interest-bearing liabilities(658) 4,478 3,820Net interest income$4,963 $4,659 $9,622Provision for Credit LossesThe provision for credit losses, which includes both the provision for loan losses and provision for off-balance sheet commitments, is based onmanagement's assessment of the adequacy of both our allowance for loan losses and our reserve for off-balance sheet lending commitments. Factors impactingthe provision include inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, localeconomic and credit conditions, the direction of the change in collateral values, and the funding probability on unfunded lending commitments. Theprovision for credit losses is charged against earnings in order to maintain our allowance for loan losses, which reflects management's best estimate ofprobable losses inherent in our loan portfolio at the balance sheet date, and our reserve for off-balance sheet lending commitments, which reflectsmanagement's best estimate of probable losses inherent in our legally binding lending-related commitments.Year ended December 31, 2018, compared to year ended December 31, 2017We recorded provision expense of $1.0 million for the year ended December 31, 2018, a $7.3 million decrease from provision expense of $8.3million for the year ended December 31, 2017. The decrease in provision expense was due to improvement in the overall credit quality of our loan portfolio,including reductions in specific reserves on certain collateral-dependent impaired loans during 2018. Our allowance for loan losses was 0.90% of total loansheld for investment at December 31, 2018, compared to 1.14% at December 31, 2017. Specific reserves on impaired loans totaled $366,000 at December 31,2018, compared to $4.8 million at December 31, 2017. General reserves totaled $33.8 million, or 0.89% of total loans held for investment at December 31,2018, compared to $32.3 million, or 1.00% at December 31, 2017.Year ended December 31, 2017, compared to year ended December 31, 2016The provision for credit losses for the year ended December 31, 2017, was $8.3 million, a decrease of $21.7 million, or 72.3%, from $30.1 million forthe year ended December 31, 2016. The decrease in provision expense was driven by significant provision expense recorded in 2016 on our energy lendingportfolio. Of the 2016 provision expense, $31.7 million was attributable to deterioration in our energy loan portfolio due to the decline in the price of oil andresulting downturn in the energy sector, partially offset by a net recovery in the remainder of our loan portfolio. Net charge-offs for the twelve months endedDecember 31, 2017, were $21.7 million compared to $21.9 million for same period in 2016, while net charge-offs for the energy portfolio were $14.6 millionand $22.7 million for the same periods, respectively. Our energy portfolio totaled $54.3 million at December 31, 2017, compared to $151.0 million atDecember 31, 2016.Noninterest IncomeOur primary sources of recurring noninterest income are service charges on deposit accounts, mortgage banking revenue, insurance commission andfee income, and other fee income.The table below presents the various components of and changes in our noninterest income for the periods indicated.(Dollars in thousands)Years Ended December 31, 2018 vs. 2017 2017 vs. 2016Noninterest income:2018 2017 2016 $ Change % Change $ Change % ChangeService charges and fees$12,754 $11,606 $11,019 $1,148 9.9 % $587 5.3 %Mortgage banking revenue9,620 15,806 14,869 (6,186) (39.1) 937 6.3Insurance commission and fee income9,720 7,207 6,775 2,513 34.9 432 6.4(Loss) gains on sales of securities, net(8) — 136 (8) N/M (136) (100.0)Losses on non-mortgage loans held for sale,net— (12,708) — 12,708 N/M (12,708) N/M(Loss) gain on sales and disposals of otherassets, net(170) 1,036 (515) (1,206) (116.4) 1,551 N/MOther fee income1,811 2,176 2,970 (365) (16.8) (794) (26.7)Other income7,513 4,064 6,614 3,449 84.9 (2,550) (38.6)Total noninterest income$41,240 $29,187 $41,868 $12,053 41.3 % $(12,681) (30.3)%Year ended December 31, 2018, compared to year ended December 31, 2017Noninterest income for the year ended December 31, 2018, increased by $12.1 million, or 41.3%, to $41.2 million, compared to $29.2 million for theyear ended December 31, 2017.The increase in noninterest income during the year ended December 31, 2018, was largely driven by $12.7 million in losses incurred on non-mortgage loans held for sale in 2017, with no comparable expense incurred during 2018. Other contributing factors were increases in other income andinsurance commission and fee income of $3.4 million and $2.5 million, respectively. The most significant driver of the increase in other noninterest incomefor the year ended December 31, 2018, compared to 2017, was a positive valuation adjustment of $2.0 million on a common stock investment due to a recentaccounting standard change. For more information on this accounting standard update, please refer to Note 1 - Significant Accounting Policies in the notes tothe consolidated financial statements. The increase in insurance commission and fee income was primarily driven by the RCF acquisition in July 2018, whichsignificantly expanded the Company's insurance presence in the North Louisiana market.Partially offsetting the net increase in noninterest income was a $6.2 million decrease in mortgage banking revenue. This decrease was primarily dueto a 67.2% decline in the volume of mortgage loans sold, resulting in a $5.0 million decrease in gains on the sale of mortgage loans. The reduction in volumewas primarily driven by the closing of a loan production office outside of our core geographic footprint that accounted for a significant portion of mortgageproduction, as we shifted our focus to retail originations within our core geographic banking footprint. Also contributing to the decrease in volume onmortgage loans sold was a broader downturn in the mortgage industry. As part of this strategy, we also reduced the amount of third party originations in ourmortgage pipeline during 2018 compared to 2017.Year ended December 31, 2017, compared to year ended December 31, 201644Noninterest income was $29.2 million, representing a decrease of $12.7 million, or 30.3%, compared to the year ended December 31, 2016.The decrease in noninterest income during the year ended December 31, 2017, was primarily driven by $12.7 million in losses incurred on non-mortgage loans held for sale in 2017, with no comparable expense incurred during 2016. In addition, other income decreased by $2.5 million, or 38.6%, to$4.1 million for the year ended December 31, 2017, compared to $6.6 million for the year ended December 31, 2016. The decrease was primarily a result of adecrease in limited partnership income of $2.3 million. During the year ended December 31, 2016, we recognized a gain of $1.9 million as a result of the saleof certain assets held in one of our limited partnership investments. Excluding this gain, we recorded income from our limited partnerships of $893,000 forthe year ended December 31, 2016, compared to income of $444,000 for the year ended December 31, 2017. The investment partnerships are Small BusinessInvestment Companies, and our investments in these partnerships provide us credit toward our requirements under the Community Reinvestment Act.Partially offsetting the net decrease in noninterest income during the year ended December 31, 2017, compared to 2016, was a $1.6 million increasein gains on sale and disposal of other assets. This was driven by the sale of a bank-owned tract of vacant land in 2017 for a gain of $1.5 million, with nocorresponding sale during 2016.Noninterest ExpenseThe following table presents the significant components of noninterest expense for the periods indicated:(Dollars in thousands)Years Ended December 31, 2018 vs. 2017 2017 vs. 2016Noninterest expense:2018 2017 2016 $ Change % Change $ Change % ChangeSalaries and employee benefits$80,487 $70,862 $63,605 $9,625 13.6 % $7,257 11.4 %Occupancy and equipment, net15,445 15,915 17,127 (470) (3.0) (1,212) (7.1)Data processing6,182 5,209 4,837 973 18.7 372 7.7Electronic banking2,883 2,056 2,365 827 40.2 (309) (13.1)Communications2,028 1,928 2,474 100 5.2 (546) (22.1)Advertising and marketing4,275 2,923 2,849 1,352 46.3 74 2.6Professional services3,269 4,722 4,587 (1,453) (30.8) 135 2.9Regulatory assessments2,457 2,867 3,229 (410) (14.3) (362) (11.2)Loan related expenses3,039 4,419 3,873 (1,380) (31.2) 546 14.1Office and operations5,881 5,498 6,003 383 7.0 (505) (8.4)Litigation settlement— 10,000 — (10,000) (100.0) 10,000 N/MOther5,290 4,275 5,758 1,015 23.7 (1,483) (25.8)Total noninterest expense$131,236 $130,674 $116,707 $562 0.4 % $13,967 12.0 %Year ended December 31, 2018, compared to year ended December 31, 2017Noninterest expense increased by $562,000, or 0.4%, in 2018 to $131.2 million, primarily due to increases in salaries and employee benefits,advertising and marketing expenses and other noninterest expense.Salaries and employee benefits increased by $9.6 million, or 13.6%, for the year ended December 31, 2018, compared to 2017. The increase wasdriven by increases in the cost of salaries and incentive compensation. The increase in salary expense was driven by the addition of our Houston lift-out team,consummation of the RCF acquisition and additional headcount to support our recent growth. The increase in incentive compensation was driven by theoverall improvement in the Company's performance during 2018 compared to 2017, which resulted in performance targets, such as return on assets,individual loan volume and credit quality goals, being met by more employees.The $1.4 million, or 46.3%, increase in advertising and marketing expense for the year ended December 31, 2018, compared to 2017, was due to aCompany-wide expense management strategy that temporarily scaled back marketing expenditures in 2017. In March 2018, marketing efforts were resumedwith the launch of a new advertising campaign.Other noninterest expense increased by $1.0 million, or 23.7%, during the year ended December 31, 2018, compared to 2017. The most significantdriver was intangible asset amortization expense, which increased by $352,000 due to the RCF acquisition in 2018.These increases were partially offset by decreases of $10.0 million, $1.5 million and $1.4 million in litigation settlement expenses, professionalservices and loan related expenses, respectively.45During the year ended December 31, 2017, we entered into a Settlement and Release Agreement with respect to litigation with the ResCapLiquidating Trust ("ResCap"), as successor to Residential Funding Company, LLC f/k/a Residential Funding Corporation. Under the agreement, we paid$10.0 million to fully resolve all claims under the lawsuit and to avoid the further costs, disruption and distraction of defending the ResCap litigation. Werecorded a charge to non-interest expense in our consolidated statement of income in 2017 to recognize this settlement. There were no such charges recordedduring the year ended December 31, 2018.During the year ended December 31, 2017, we incurred approximately $883,000 in consulting fees related to the marketing and sale of certainenergy loans as part of our strategic initiative to reduce our exposure to nonperforming energy loans, and incurred approximately $613,000 in legal fees thatwere associated with the resolution of the ResCap litigation. Neither of these expenses were incurred during the year ended December 31, 2018.The largest driver of the decrease in loan related expenses was a $544,000 decrease in loan related legal fees. During 2017, the Company incurredlegal costs in conjunction with the marketing and sale of energy loans which were not incurred during 2018. The remaining decreases in loan relatedexpenses were not individually significant and generally resulted from a lower volume of mortgage loans sold during 2018 compared to 2017.Year ended December 31, 2017, compared to year ended December 31, 2016Noninterest expense for the year ended December 31, 2017, increased by $14.0 million, or 12.0% to $130.7 million, compared to $116.7 million forthe year ended December 31, 2016. The increase was primarily due to increases in litigation settlement expense and salaries and employee benefit expense.As discussed above, during the year ended December 31, 2017, we entered into a Settlement and Release Agreement with respect to litigation withResCap. Under the agreement, we paid $10.0 million to fully resolve all claims under the lawsuit.Salaries and employee benefit expense increased $7.3 million, or 11.4%, during the year ended December 31, 2017, compared to 2016. The amountof salary expenses deferred as loan origination costs in 2017 declined by $3.0 million compared to 2016 due to updating our estimates of costs to originateloans, as well as a change in the mix of loans originated in 2017 compared to 2016. Salary expense also increased by $1.7 million during the year endedDecember 31, 2017, compared to the same period in 2016, primarily as a result of increases in headcount and annual raises. Incentive compensation expenseincreased by $1.2 million during the year ended December 31, 2017, compared to 2016, primarily as a result of improvements in financial performance inrelation to established metrics.These increases were partially offset by decreases in occupancy and equipment and other noninterest expense.Occupancy and equipment expense decreased by $1.2 million or 7.1% for the year ended December 31, 2017, compared to 2016, primarily as aresult of a decrease in depreciation expense relating to leasehold improvements and furniture, fixtures and equipment as several significant items becamefully depreciated during the third and fourth quarter of 2016, resulting in lower depreciation expense in 2017.Other noninterest expense decreased by $1.5 million, or 25.8%, during the year ended December 31, 2017, compared to 2016. The majority of thedecrease was due to lower amortization expense on our deposit-based and relationship-based intangible assets during 2017 as two significant deposit-basedintangibles became fully amortized during the fourth quarter of 2016. Amortization expense for the year ended December 31, 2017, was $518,000 comparedto $1.5 million in 2016.Income Tax ExpenseFor the year ended December 31, 2018, we recognized income tax expense of $10.8 million, compared to $5.8 million and $2.9 million for the yearsended December 31, 2017 and 2016, respectively. Our effective tax rate for the year ended December 31, 2018, was 17.4% compared to 28.4% and 18.5% forthe years ended December 31, 2017 and 2016, respectively. The decrease in our effective tax rate for the year ended December 31, 2018 was primarily theresult of the Tax Cuts and Jobs Act ("Tax Act"), which was enacted on December 22, 2017.The Tax Act lowered the Federal corporate income tax rate to 21% from 35% for tax years beginning in 2018. The Tax Act also required arevaluation of the Company's net deferred tax asset ("DTA") to account for the future impact of lower46corporate income tax rates and other provisions of the legislation. The revaluation of the Company's DTA balance resulted in a $282,000 adjustment fromaccumulated other comprehensive income to retained earnings.Our effective income tax rates have differed from the applicable U.S. statutory rates of 21% at December 31, 2018, and 35% for both December 31,2017 and 2016, due to the effect of tax-exempt income from securities, low income housing and qualified school construction bond tax credits, tax-exemptincome from life insurance policies and income tax effects associated with stock-based compensation. Because of these items, we expect our effective incometax rate to continue to remain below the applicable U.S. statutory rate. These tax-exempt items can have a larger than proportional effect on the effectiveincome tax rate as net income decreases.Comparison of Financial Condition at December 31, 2018, and December 31, 2017GeneralTotal assets increased by $667.6 million, or 16.1%, to $4.82 billion at December 31, 2018, from $4.15 billion at December 31, 2017. The increasewas primarily attributable to increases in loans held for investment and securities available for sale of $548.1 million and $171.1 million, respectively, andwas partially offset by a decrease of $70.5 million in cash and cash equivalents.Loan PortfolioOur loan portfolio is our largest category of interest-earning assets and interest income earned on our loan portfolio is our primary source of income.At December 31, 2018, 71.5% of the loan portfolio held for investment was comprised of commercial and industrial loans, mortgage warehouse lines of creditand commercial real estate loans, which were primarily originated within our market areas of North Louisiana, Texas and Mississippi.The following table presents the ending balance of our loan portfolio held for investment by purpose category at the dates indicated. December 31, 2018 vs. 2017(Dollars in thousands)2018 2017 Real estate:Amount Percent Amount Percent $ Change % ChangeCommercial real estate$1,228,402 32.4% $1,083,275 33.5% $145,127 13.4 %Construction/land/land development429,660 11.3 322,404 9.9 107,256 33.3Residential real estate629,714 16.6 570,583 17.6 59,131 10.4Total real estate2,287,776 60.3 1,976,262 61.0 311,514 15.8Commercial and industrial1,272,566 33.6 989,220 30.5 283,346 28.6Mortgage warehouse lines of credit207,871 5.5 255,044 7.9 (47,173) (18.5)Consumer20,892 0.6 20,505 0.6 387 1.9Total loans held for investment$3,789,105 100.0% $3,241,031 100.0% $548,074 16.9 % December 31,(Dollars in thousands)2016 2015 2014Real estate:Amount Percent Amount Percent Amount PercentCommercial real estate$1,026,752 33.0% $861,540 28.7% $793,408 27.3%Construction/land/land development311,279 10.0 310,773 10.3 258,421 8.9Residential real estate414,226 13.3 429,137 14.2 349,526 12.1Total real estate1,752,257 56.3 1,601,450 53.2 1,401,355 48.3Commercial and industrial1,135,683 36.5 1,232,265 40.9 1,273,551 44.0Mortgage warehouse lines of credit201,997 6.5 156,803 5.2 199,794 6.9Consumer22,138 0.7 22,145 0.7 22,724 0.8Total loans held for investment$3,112,075 100.0% $3,012,663 100.0% $2,897,424 100.0%47At December 31, 2018, total loans held for investment were $3.79 billion, an increase of $548.1 million, or 16.9%, compared to $3.24 billion atDecember 31, 2017. The increase was driven by organic growth in all markets and led by increases in commercial and industrial and commercial real estateloans. In 2018, as a complement to our organic growth strategy, several lift-out teams were on-boarded in our Houston market and seasoned lendingprofessionals and relationship managers were recruited in our Dallas and Shreveport markets. Our Houston lift-out team was responsible for $130.3 million inloan growth during 2018.Loan Portfolio Maturity AnalysisThe table below presents the maturity distribution of our loans held for investment at December 31, 2018. The table also presents the portion of ourloans that have fixed interest rates, rather than interest rates that fluctuate over the life of the loans based on changes in the interest rate environment.(Dollars in thousands)December 31, 2018Real estate:One Year or Less Over One Year Through Five Years Over Five Years TotalCommercial real estate$213,006 $771,704 $243,692 $1,228,402Construction/land/land development119,606 275,445 34,609 429,660Residential real estate loans75,663 268,320 285,731 629,714Total real estate408,275 1,315,469 564,032 2,287,776Commercial and industrial loans508,101 668,215 96,250 1,272,566Mortgage warehouse lines of credit207,871 — — 207,871Consumer loans6,536 13,750 606 20,892Total loans held for investment$1,130,783 $1,997,434 $660,888 $3,789,105 Amounts with fixed rates$220,967 $1,055,984 $292,084 $1,569,035Amounts with variable rates909,816 941,450 368,804 2,220,070Total$1,130,783 $1,997,434 $660,888 $3,789,105Nonperforming AssetsNonperforming assets consist of nonperforming loans and property acquired through foreclosures or repossession. Our nonperforming loans arecomprised of nonaccrual loans and accruing loans that are contractually 90 days or more past due.Loans are considered past due when principal and interest payments have not been received at the date such payments are contractually due. Wediscontinue accruing interest on loans when we determine the borrower's financial condition is such that collection of interest and principal payments inaccordance with the terms of the loan are not reasonably assured. Loans may be placed on nonaccrual status even if the contractual payments are not past dueif information becomes available that causes substantial doubt about the borrower's ability to meet the contractual obligations of the loan. All interestaccrued but not collected for loans that are placed on nonaccrual status is reversed against interest income. Interest income is subsequently recognized onlyto the extent cash payments are received in excess of principal outstanding. Loans are returned to accrual status when all principal and interest amountscontractually due are brought current and future payments are reasonably assured. If a loan is determined by management to be uncollectible, regardless ofsize, the portion of the loan determined to be uncollectible is then charged to the allowance for loan losses.We manage the quality of our lending portfolio in part through a disciplined underwriting policy and through continual monitoring of loanperformance and borrowers' financial condition. There can be no assurance, however, that our loan portfolio will not become subject to losses due to declinesin economic conditions or deterioration in the financial condition of our borrowers.48The following schedule shows our nonperforming loans and nonperforming assets at the dates indicated:(Dollars in thousands)As of December 31,Nonperforming loans held for investment2018 2017 2016 2015 2014Commercial real estate$8,281 $1,745 $1,975 $2,638 $5,881Construction/land/land development935 1,097 816 1,267 3,237Residential real estate6,668 7,166 7,188 11,272 8,090Commercial and industrial15,792 13,512 56,372 18,557 1,840Consumer180 282 210 132 142Total nonperforming loans held for investment31,856 23,802 66,561 33,866 19,190Nonperforming loans held for sale741 — — — —Total nonperforming loans32,597 23,802 66,561 33,866 19,190Other real estate owned Commercial real estate, construction/land/land development2,993 390 794 1,195 1,437Residential real estate746 109 779 212 379Total other real estate owned3,739 499 1,573 1,407 1,816Other repossessed assets owned— 75 — — 41Total repossessed assets owned3,739 574 1,573 1,407 1,857Total nonperforming assets$36,336 $24,376 $68,134 $35,273 $21,047Troubled debt restructuring loans - nonaccrual$5,793 $2,622 $10,900 $5,844 $6,541Troubled debt restructuring loans - accruing2,054 14,234 4,225 4,249 6,000Total loans held for investment3,789,105 3,241,031 3,112,075 3,012,663 2,897,424Ratio of nonperforming loans held for investment to total loans heldfor investment0.84% 0.73% 2.14% 1.12% 0.66%Ratio of nonperforming assets to total assets0.75 0.59 1.67 0.89 0.56At December 31, 2018, total nonperforming loans increased by $8.8 million, or 37.0%, over December 31, 2017, primarily due to downgradesassociated with three commercial lending relationships, the largest of which was a $6.3 million commercial real estate loan secured by a health care facilitythat was reclassified to nonaccrual status due to the facility experiencing lower than expected occupancy rates. The increase in other real estate owned wascaused by the closure and reclassification, from premises and equipment to other real estate owned, of one of our branch locations valued at $2.8 million, andsubsequently listing the property for sale. Despite the increase in total nonperforming loans, we continue to see improvement in our overall credit profile asdisclosed in Note 4 - Loans within our consolidated financial statements, driven by downward trends in impaired and past due loans.Potential Problem LoansFrom a credit risk standpoint, we classify loans in one of five categories: pass, special mention, substandard, doubtful or loss. The classifications ofloans reflect a judgment about the risks of default and loss associated with the loan. We review the ratings on loans and adjust them to reflect the degree ofrisk and loss that is felt to be inherent in each loan. The methodology is structured so that reserve allocations are increased in accordance with deteriorationin credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decreasein risk and loss). Loans rated special mention reflect borrowers who exhibit credit weaknesses or downward trends deserving close attention. If leftuncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank's credit position at some futuredate. While potentially weak, no loss of principal or interest is envisioned and these borrowers currently do not pose sufficient risk to warrant adverseclassification. Loans rated substandard are those borrowers with deteriorating trends and well-defined weaknesses that jeopardize the orderly liquidation ofdebt. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Normalrepayment from the borrower might be in jeopardy, although no loss of principal is envisioned.49Loans rated as doubtful have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection orliquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values. Loans classified as loss arecharged-off and we have no expectation of the recovery of any payments in respect to loans rated as loss. Information regarding the internal risk ratings of ourloans at December 31, 2018, is included in Note 4 - Loans in the notes to our consolidated financial statements contained in Item 8 of this report.Allowance for Loan LossesWe maintain an allowance for loan losses that represents management's estimate of loan losses inherent within the portfolio of loans held forinvestment at the respective balance sheet date. The allowance for loan losses is maintained at a level which management believes is adequate to absorb allexisting probable losses on loans in the loan portfolio. The amount of the allowance for loan losses should not be interpreted as an indication that charge-offsin future periods will necessarily occur in those amounts, or at all. In determining the allowance for loan losses, we estimate losses on specific loans, or groupsof loans, where the probable loss can be identified and reasonably determined. The balance of the allowance for loan losses is based on internally assignedrisk classifications of loans, historical loan loss rates, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations,delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates.The amount of the allowance is affected by loan charge-offs, which decrease the allowance, recoveries on loans previously charged off, whichincrease the allowance, as well as the provision for loan losses charged to income, which increases the allowance. We allocate the allowance for loan losseseither to specific allocations, or general allocations for each major loan category. In determining the provision for loan losses, management monitorsfluctuations in the allowance resulting from actual charge-offs and recoveries and to periodically review the size and composition of the loan portfolio inlight of current and anticipated economic conditions. If actual losses exceed the amount of allowance for loan losses, it could materially and adversely affectour earnings.As a general rule, when it becomes evident that the full principal and accrued interest of a loan may not be collected, or at 90 days past due, we willreflect that loan as nonperforming. It will remain nonperforming until it performs in a manner that it is reasonable to expect that we will collect principal andaccrued interest in full. When the amount or likelihood of a loss on a loan has been confirmed, a charge-off should be taken in the period it is determined.We establish general allocations for each major loan category and credit quality. The general allocation is based, in part, on historical charge-offexperience and the expected loss given default, derived from our internal risk rating process. Other adjustments may be made to the allowance for pools ofloans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. We giveconsideration to trends, changes in loan mix, delinquencies, prior losses and other related information.In connection with the review of our loan portfolio, we consider risk elements attributable to particular loan types or categories in assessing thequality of individual loans. Some of the risk elements we consider include:•for commercial real estate loans, the debt service coverage ratio, operating results of the owner in the case of owner occupied properties, the loanto value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical ofproperties of that type;•for construction, land and land development loans, the perceived feasibility of the project including the ability to sell developed lots orimprovements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale orprelease, 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 employmentand income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral; and•for commercial and industrial loans, the debt service coverage ratio (income from the business in excess of operating expenses compared to loanrepayment requirements), the operating results of the commercial, industrial or professional enterprise, the borrower's business, professional andfinancial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and thevalue, nature and marketability of collateral.50The following table presents the allowance for loan loss by loan category: December 31,(Dollars in thousands)2018 2017 2016Loans secured by real estate:Amount %(1) Amount %(1) Amount %(1)Commercial real estate$8,999 32.4% $8,998 33.5% $8,718 33.0%Construction/land/land development3,331 11.3 2,950 9.9 2,805 10.0Residential real estate5,705 16.6 5,807 17.6 5,003 13.3Commercial and industrial15,616 33.6 18,831 30.5 33,590 36.5Mortgage warehouse lines of credit316 5.5 214 7.9 139 6.5Consumer236 0.6 283 0.6 276 0.7Total$34,203 100.0% $37,083 100.0% $50,531 100.0% December 31,(Dollars in thousands)2015 2014Loans secured by real estate:Amount %(1) Amount %(1)Commercial real estate$7,451 28.7% $9,173 27.3%Construction/land/land development3,927 10.3 3,630 8.9Residential real estate5,094 14.2 2,090 12.1Commercial and industrial23,648 40.9 17,361 44.0Mortgage warehouse lines of credit761 5.2 1,948 6.9Consumer349 0.7 579 0.8Total$41,230 100.0% $34,781 100.0%____________________________(1) Represents the ratio of each loan type to total loans held for investment.Our allowance for loan losses decreased by $2.9 million, or 7.8%, to $34.2 million at December 31, 2018, from $37.1 million at December 31, 2017.The ratio of allowance for loan losses to total loans held for investment at December 31, 2018, and December 31, 2017, was 0.90% and 1.14%, respectively.The decrease in the total allowance for loan losses was driven primarily by a $4.4 million decrease in specific reserves that was partially offset by a $1.5million increase in general reserves due to significant growth in our loan portfolio. Our specific reserve was $366,000, or 0.01% of total loans held forinvestment at December 31, 2018, compared to $4.8 million, or 0.15% of total loans held for investment at December 31, 2017. Our general reserve totaled$33.8 million and $32.3 million at December 31, 2018, and 2017, respectively.51The following table presents an analysis of the allowance for loan losses and other related data as of the periods indicated.(Dollars in thousands) Years Ended December 31,Allowance for loan losses2018 2017 2016 2015 2014Balance at beginning of period$37,083 $50,531 $41,230 $34,781 $31,283Provision for loan losses1,581 8,219 31,165 10,941 16,053Charge-offs: Commercial real estate1,300 463 422 338 3,248Construction/land/land development228 3 24 25 139Residential real estate407 1,446 505 885 473Commercial and industrial5,068 21,767 24,851 4,070 9,192Consumer121 198 604 399 76Total charge-offs7,124 23,877 26,406 5,717 13,128Recoveries: Commercial real estate226 93 25 35 238Construction/land/land development6 5 7 13 11Residential real estate133 125 185 240 24Commercial and industrial2,206 1,918 4,199 804 144Consumer92 69 126 133 156Total recoveries2,663 2,210 4,542 1,225 573Net charge-offs4,461 21,667 21,864 4,492 12,555Balance at end of period$34,203 $37,083 $50,531 $41,230 $34,781Ratio of allowance for loan losses to: Nonperforming loans held for investment107.37% 155.80% 75.92% 121.74% 181.25%Loans held for investment0.90 1.14 1.62 1.37 1.20Net charge-offs as a percentage of: Provision for loan losses282.16 263.62 70.16 41.06 78.21Allowance for loan losses13.04 58.43 43.27 10.89 36.10Average loans held for investment0.13% 0.69% 0.71% 0.15% 0.48%SecuritiesOur securities portfolio is the second largest component of earning assets and provides a significant source of revenue. We use the securitiesportfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk and meet collateral as well as regulatorycapital requirements. We manage the securities portfolio to optimize returns while maintaining an appropriate level of risk. Securities within the portfolio areclassified as either held-to-maturity, available-for-sale or at fair value through income, based on the intent and objective of the investment and the ability tohold to maturity. Unrealized gains and losses arising in the available for sale portfolio as a result of changes in the fair value of the securities are reported onan after-tax basis as a component of accumulated other comprehensive income in stockholders' equity while securities classified as held to maturity arecarried at amortized cost. For further discussion of the valuation components and classification of investment securities, see Note 1 - Significant AccountingPolicies in the consolidated financial statements contained in Item 8 of this report.Our securities portfolio totaled $606.2 million at December 31, 2018, representing an increase of $169.4 million, or 38.8%, from $436.8 million atDecember 31, 2017. During the quarter ended September 30, 2018, we borrowed $250.0 million from the Federal Home Loan Bank of Dallas ("FHLB") tofund loan growth and manage short-term liquidity. However, the portion not utilized to repay higher rate advances was re-deployed into higher yieldinginterest earning assets such as loans, investment securities and interest bearing cash accounts. For additional information regarding our securities portfolio,please see Note 3 - Securities in the consolidated financial statements contained in Item 8 of this report.The following table sets forth the composition of our securities portfolio at the dates indicated. December 31,(Dollars in thousands)2018 2017 2016Available for sale:Amount % of Total Amount % of Total Amount % of TotalState and municipal securities$100,883 17.5% $129,978 32.1% $132,469 35.3%Corporate bonds11,034 1.9 3,136 0.8 — —U.S. government and agency securities61,150 10.6 — — — —Commercial mortgage-backed securities16,766 2.9 — — — —Residential mortgage-backed securities186,315 32.4 105,029 26.0 106,021 28.2Residential collateralized mortgage obligations199,496 34.7 166,389 41.1 137,027 36.5Total$575,644 100.0% $404,532 100.0% $375,517 100.0%Held to maturity: State and municipal securities$19,169 $20,188 $20,710 Securities carried at fair value through income: State and municipal securities$11,361 $12,033 $12,511 The following table presents the fair value of securities available for sale and amortized cost of securities held to maturity and their correspondingyields at December 31, 2018. The securities are grouped by contractual maturity and use amortized cost for all yield calculations. Mortgage backed securitiesand collateralized mortgage obligations, which do not have contractual payments due at a single maturity date, are shown at the date the last underlyingmortgage matures. December 31, 2018(Dollars in thousands)Within One Year After One Year butWithin Five Years After Five Years butWithin Ten Years After Ten Years TotalAvailable for sale:Amount Yield Amount Yield Amount Yield Amount Yield Amount YieldState and municipal securities$3,139 3.11% $25,422 3.06% $66,231 2.57% $6,091 3.61% $100,883 2.77%Corporate bonds— — — — 11,034 4.60 — — 11,034 4.60U.S. government and agencysecurities55,515 2.42 — — 4,879 3.38 756 3.93 61,150 2.52Commercial mortgage-backedsecurities— — 7,572 2.66 4,792 3.51 4,402 3.64 16,766 3.16Residential mortgage-backedsecurities— — — — 40,475 2.66 145,840 2.89 186,315 2.84Residential collateralizedmortgage obligations— — — — — — 199,496 2.70 199,496 2.70Total securities available for sale$58,654 2.46% $32,994 2.97% $127,411 2.84% $356,585 2.81% $575,644 2.79%Held to maturity: State and municipal securities$— —% $13,954 2.97% $— —% $5,215 0.79% $19,169 2.38%Securities carried at fair valuethrough income: State and municipal securities— — — — — — 11,361 3.41 11,361 3.41Total$58,654 2.46% $46,948 2.97% $127,411 2.84% $373,161 2.80% $606,174 2.79%The contractual maturity of mortgage-backed securities and collateralized mortgage obligations is not a reliable indicator of their expected lifebecause borrowers have the right to prepay their obligations at any time. Mortgage-backed securities and collateralized mortgage obligations are typicallyissued with stated principal amounts and are backed by pools of mortgage loans and other loans with varying maturities. The term of the underlyingmortgages and loans may vary significantly due to the ability of a borrower to prepay outstanding amounts. Monthly pay downs on mortgage-backedsecurities tend to cause the average life of the securities to be much different than the stated contractual maturity. During a period of increasing interest rates,fixed rate mortgage-backed securities do not tend to experience heavy prepayments of52principal, and, consequently, the average life of this security is typically lengthened. If interest rates begin to fall, prepayments may increase, therebyshortening the estimated average life of this security.Other than securities issued by government agencies or government sponsored enterprises, we did not own securities of any one issuer for whichaggregate adjusted cost exceeded 10.0% of consolidated stockholders' equity at December 31, 2018, or December 31, 2017. Additionally, we do not hold anyFannie Mae or Freddie Mac preferred stock, collateralized debt obligations, structured investment vehicles or second lien elements in the investmentportfolio, nor does the investment portfolio contain any securities that are directly backed by subprime or Alt-A mortgages.Securities Carried at Fair Value through IncomeAt December 31, 2018, and 2017, we held two fixed-rate community investment bonds totaling $11.4 million and $12.0 million, respectively. Weelected the fair value option on these securities to offset corresponding changes in the fair value of related interest rate swap agreements.DepositsDeposits are the primary funding source used to fund our loans, investments and operating needs. We offer a variety of products designed to attractand retain both consumer and commercial deposit customers. These products consist of noninterest and interest-bearing checking accounts, savings deposits,money market accounts and time deposits. Deposits are primarily gathered from individuals, partnerships and corporations in our market areas. We alsoobtain deposits from local municipalities. Our policy also permits the acceptance of brokered deposits on a limited basis, and our current deposits labeled asbrokered are relationship-based accounts that we believe are stable.We manage our interest expense on deposits through specific deposit product pricing that is based on competitive pricing, economic conditions andcurrent and anticipated funding needs. We may use interest rates as a mechanism to attract or deter additional deposits based on our anticipated fundingneeds and liquidity position. We also consider potential interest rate risk caused by extended maturities of time deposits when setting the interest rates inperiods of future economic uncertainty.The following table presents our deposit mix at the dates indicated: December 31, 2018 December 31, 2017 December 31, 2016(Dollars in thousands)Balance % of Total Balance % of Total Balance % of TotalNoninterest-bearing demand$951,015 25.1% $832,853 23.7% $780,065 22.7%Interest-bearing demand738,725 19.5 738,967 21.0 788,936 22.9Money market815,997 21.6 900,039 25.7 793,016 23.0Time deposits796,552 21.1 619,093 17.6 648,941 18.8Brokered (1)332,341 8.8 276,214 7.9 295,403 8.6Savings148,508 3.9 144,848 4.1 136,905 4.0Total deposits$3,783,138 100.0% $3,512,014 100.0% $3,443,266 100.0%____________________________(1) Brokered time deposits of $7.9 million are included in the brokered category for December 31, 2018.53The following schedule reflects the classification of our average deposits and the average rate paid on each deposit category for the periodsindicated: Year Ended December 31, 2018 2017 2016(Dollars in thousands)Average Balance InterestExpense AverageRate Paid Average Balance InterestExpense AverageRate Paid Average Balance InterestExpense AverageRate PaidInterest-bearing demand$690,061 $3,951 0.57% $692,249 $2,728 0.39%$724,237$2,3020.32%Money market887,817 9,328 1.05 873,917 6,529 0.75 744,356 4,513 0.61Time deposits712,913 10,669 1.50 630,770 6,607 1.05 673,774 6,543 0.97Brokered270,109 5,530 2.05 275,957 3,272 1.19 299,028 1,722 0.58Savings148,377 193 0.13 143,565 178 0.12 136,859 170 0.12Total interest-bearing2,709,277 29,671 1.10 2,616,458 19,314 0.74 2,578,254 15,250 0.59Noninterest-bearingdemand948,585 841,375 758,878 Total average deposits$3,657,862 $29,671 0.81% $3,457,833 $19,314 0.56% $3,337,132 $15,250 0.46%Our average deposit balance was $3.66 billion for the year ended December 31, 2018, an increase of $200.0 million, or 5.8%, from $3.46 billion forthe year ended December 31, 2017. This increase is primarily due to our continued relationship-based efforts to attract deposits within our markets. Theaverage annualized rate paid on our interest-bearing deposits for the year ended December 31, 2018, was 1.10%, compared to 0.74% for the year endedDecember 31, 2017. The increase in the average cost of our deposits was primarily the result of increases in market interest rates that occurred during 2018,which caused us to increase the interest rates we paid on deposits to remain competitive with other depository institutions in our markets.Average noninterest-bearing deposits at December 31, 2018, were $948.6 million, compared to $841.4 million at December 31, 2017, an increase of$107.2 million, or 12.7%, and represented 25.9% and 24.3% of average total deposits for the years ended December 31, 2018, and 2017, respectively.The following table presents the maturity distribution of our time deposits as of December 31, 2018:(Dollars in thousands)Time Deposits (1)Remaining maturity:Certificates less than$100,000 Certificates of $100,000 ormore3 months or less$25,478 $62,784Over 3 through 6 months20,893 141,286Over 6 through 12 months40,332 181,976Over 12 months78,793 252,861Total$165,496 $638,907____________________________(1) Includes $7.9 million of brokered time deposits.BorrowingsLong-term and short-term advances from the FHLB increased by $198.7 million and $100.0 million, respectively, at December 31, 2018, comparedto December 31, 2017. The increase in long-term advances was due to a $250.0 million FHLB advance obtained in the third quarter of 2018, which was re-deployed into higher yielding interest-earning assets and to replace existing higher rate FHLB advances. Short-term FHLB advances were utilized to provideshort-term liquidity as we experienced a delay in the receipt of bank deposits from state and local municipalities compared to the timing of historical cashinflows. The short-term liquidity demand was driven primarily by significant loan growth during the fourth quarter of 2018.Borrowed funds are summarized as follows: December 31,(Dollars in thousands)2018 2017 2016Overnight repurchase agreements with depositors$40,314 $36,178 $33,445Short-term FHLB advances100,000 — —GNMA repurchase liability30,649 32,575 23,532Long-term FHLB advances(1)274,261 75,604 76,898Total FHLB advances and other borrowings$445,224 $144,357 $133,875Junior subordinated debentures$9,644 $9,619 $9.596____________________________(1) Includes an FHLB advance of $250.0 million at December 31, 2018, which has a final maturity in 2033 that may be called quarterly at the option of the FHLB beginning in thethird quarter of 2019.Overnight repurchase agreements with depositors consist of obligations of ours to depositors and mature on a daily basis. These obligations todepositors carried a daily average interest rate of 0.86% and 0.29% for the years ended December 31, 2018 and 2017, respectively.Our long-term debt consists of advances from the FHLB with original maturities greater than one year. Interest rates for FHLB long-term advancesoutstanding at December 31, 2018, ranged from 1.65% to 5.72% and were subject to restrictions or penalties in the event of prepayment.As of December 31, 2018, we held 16 unfunded letters of credit from the FHLB totaling $186.6 million with expiration dates ranging from February14, 2019, to November 30, 2020. These letters of credit either support pledges for our public fund deposits or confirm letters of credit we have issued tosupport our customers' businesses. Security for all indebtedness and outstanding commitments to the FHLB consists of a blanket floating lien on all of ourfirst mortgage loans, commercial real estate and other real estate loans, as well as our investment in capital stock of the FHLB and deposit accounts at theFHLB. The net amounts available under the blanket floating lien as of December 31, 2018, and December 31, 2017, were $468.8 million and $649.0 million,respectively.Additionally, as of December 31, 2018, we had the ability to borrow $795.5 million from the discount window at the Federal Reserve Bank of Dallas("FRB"), with $1.05 billion in commercial and industrial loans pledged as collateral. There were no borrowings against this line as of December 31, 2018.LiquidityManagement oversees our liquidity position to ensure adequate cash and liquid assets are available to support our operations and satisfy current andfuture financial obligations, including demand for loan funding and deposit withdrawals. Management continually monitors, forecasts and tests our liquidityand non-core dependency ratios to ensure compliance with targets established by our Asset-Liability Management Committee and approved by our board ofdirectors.Management measures our liquidity position by giving consideration to both on-balance sheet and off-balance sheet sources of and demands forfunds on a daily and weekly basis. At December 31, 2018, and December 31, 2017, our cash and liquid securities totaled 5.0% and 5.7% of total assets,respectively, providing liquidity to support our existing operations.The Company, which is a separate legal entity apart from the Bank, must provide for its own liquidity, including payment of any dividends that maybe declared for our common stockholders and interest and principal on any outstanding debt or trust preferred securities incurred by the Company. AtDecember 31, 2018, and December 31, 2017, the Company had available cash balances of $5.9 million and $10.6 million, respectively. This cash is availablefor the general corporate purposes described above, as well as providing capital support to the Bank and financing potential future acquisitions. In addition,the Company has up to $50.0 million available under a line of credit. See Note 10 - Borrowings contained in Item 8 of this report for more information.There are regulatory restrictions on the ability of the Bank to pay dividends under federal and state laws, regulations and policies. See "Item 1.Business - Regulation and Supervision" above for more information.In addition to cash generated from operations, we utilize a number of funding sources to manage our liquidity, including core deposits, investmentsecurities, cash and cash equivalents, loan repayments, federal funds lines of credit54available from other financial institutions, as well as advances from the FHLB. We may also use the discount window at the FRB as a source of short-termfunding.Core deposits, which are total deposits excluding time deposits greater than $250,000 and brokered deposits, are a major source of funds used tomeet cash flow needs. Maintaining the ability to acquire these funds as needed in a variety of markets is the key to assuring our liquidity.The investment portfolio is another source for meeting our liquidity needs. Monthly payments on mortgage-backed securities are used for short-termliquidity, and our investments are generally traded in active markets that offer a readily available source of cash through sales, if needed. Securities in ourinvestment portfolio are also used to secure certain deposit types, such as deposits from state and local municipalities.Other sources available for meeting liquidity needs include long- and short-term advances from the FHLB, and federal funds lines of credit. Long-term funds obtained from the FHLB are primarily used as an alternative source to fund long-term growth of the balance sheet by supporting growth in loansand other long-term interest-earning assets. We typically rely on such funding when the cost of such borrowings compares favorably to the rates that wewould be required to pay for other funding sources, including certain deposits. See Note 10 - Borrowings contained in Item 8 of this report for additionalborrowing capacity and outstanding advances at the FHLB.We also had unsecured federal funds lines of credit available to us, with no amounts outstanding at either date, please see Note 10 - Borrowingscontained in Item 8 of this report for detail regarding our lines of credit. These lines of credit primarily provide short-term liquidity and in order to ensureavailability of these funds, we test these lines of credit at least annually. Interest is charged at the prevailing market rate on federal funds purchased and FHLBadvances.Additionally, we had the ability to borrow at the discount window of the FRB using our commercial and industrial loans as collateral. There were noborrowings against this line as of December 31, 2018.Off-Balance Sheet Arrangements and Contractual ObligationsIn the normal course of business as a financial services provider, we enter into financial instruments, such as certain contractual obligations andcommitments to extend credit and letters of credit, to meet the financing needs of our customers. These commitments involve elements of credit risk, interestrate risk and liquidity risk. Some instruments may not be reflected in our consolidated financial statements until they are funded, and a significant portion ofcommitments to extend credit may expire without being drawn, although they expose us to varying degrees of credit risk and interest rate risk in much thesame way as funded loans.The table below presents the funding requirements of our most significant financial commitments, excluding interest and purchase discounts, at thedate indicated:(Dollars in thousands)Payments Due by PeriodDecember 31, 2018Less than One Year One-Three Years Three-Five Years Greater than Five Years TotalOperating lease obligations$4,392 $7,888 $6,646 $10,690 $29,616FHLB advances(1)100,828 2,242 7,002 264,189 374,261Subordinated debentures— — — 10,826 10,826Time deposits472,750 281,102 50,521 30 804,403Limited partnership investments(2)5,215 — — — 5,215Low income housing tax credits505 165 204 484 1,358Overnight repurchase agreements with depositors40,314 — — — 40,314Total contractual obligations$624,004 $291,397 $64,373 $286,219 $1,265,993____________________________(1) Included in the Greater than Five Years category is an FHLB advance of $250.0 million, which has a final maturity in 2033 that may be called quarterly at the option of theFHLB beginning in the third quarter of 2019.(2) These commitments represent amounts we are obligated to contribute to various limited partnership investments in accordance with the provisions of the respective limitedpartnership agreements. The capital contributions may be required at any time, and are therefore reflected in the Less than One Year category.55Credit Related CommitmentsCommitments to extend credit include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the acquisitionand development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial creditlines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has notviolated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a feeby the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower's credit quality deteriorates. A number ofcommercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do notnecessarily represent future cash requirements.A substantial majority of the letters of credit are standby agreements that obligate us to fulfill a customer's financial commitments to a third party ifthe customer is unable to perform. We issue standby letters of credit primarily to provide credit enhancement to our customers' other commercial or publicfinancing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.The table below presents our commitments to extend credit by commitment expiration date for the date indicated: December 31, 2018(Dollars in thousands)Less than One Year One-Three Years Three-Five Years Greater than Five Years TotalCommitments to extend credit(1)$405,833 $514,201 $214,488 $44,213 $1,178,735Standby letters of credit43,370 3,490 — — 46,860Total off-balance sheet commitments$449,203 $517,691 $214,488 $44,213 $1,225,595____________________________(1) Includes $360.2 million of unconditionally cancellable commitments at December 31, 2018.Stockholders' EquityStockholders' equity provides a source of permanent funding, allows for future growth and provides a degree of protection to withstand unforeseenadverse developments. At December 31, 2018, stockholders' equity was $549.8 million, representing an increase of $94.5 million, or 20.8%, compared to$455.3 million at December 31, 2017.Initial Public OfferingIn May 2018, we completed the initial public offering of our common stock at a price to the public of $34.00 per share. We issued 3,045,426 sharesin the offering, including 545,426 shares sold at the option of the underwriters, and certain selling stockholders sold 1,136,176 shares in the offering. Wereceived net proceeds of $96.3 million, before expenses, in the offering. Our common stock became eligible for trading on May 9, 2018, on the NasdaqGlobal Select Market under the symbol "OBNK."RCF AcquisitionIn July 2018, we acquired RCF, a Louisiana-based independent insurance agency, issuing 66,824 shares of our common stock at a price of $40.50per share. Common stock outstanding and additional paid in capital increased by $334,000 and $2.4 million, respectively, in partial consideration of theacquisition.Preferred StockIn 2018, we redeemed all of the 48,260 shares of our Senior Non-Cumulative Perpetual Preferred Stock, Series SBLF ("SBLF Preferred Stock"). Theaggregate redemption price of the SBLF Preferred Stock was $49.1 million, which included accrued dividends of $808,000. The SBLF Preferred Stock wasredeemed from our surplus capital, which included the proceeds of our initial public offering and terminated our participation in the Small Business LendingFund program.During 2018, all of the 901,644 shares of our outstanding Series D preferred stock were converted into shares of our common stock, on a one-for-onebasis. As a result, no shares of Series D preferred stock were outstanding at December 31, 2018.Regulatory Capital RequirementsTogether with the Bank, we are subject to various regulatory capital requirements administered by federal banking agencies. These requirements arediscussed in greater detail in "Item 1. Business - Regulation and Supervision". Failure to meet minimum capital requirements may result in certain actions byregulators that, if enforced, could have a direct material effect on our financial statements. At December 31, 2018 and 2017, we and the Bank were incompliance with all applicable regulatory capital requirements, and the Bank was classified as "well capitalized" for purposes of the prompt corrective actionregulations of the Federal Deposit Insurance Corporation. As we deploy capital and continue to grow operations, regulatory capital levels may decreasedepending on the level of earnings. However, we expect to monitor and control growth in order to remain "well capitalized" under applicable regulatoryguidelines and in compliance with all applicable regulatory capital standards.The following table presents our regulatory capital ratios, as well as those of the Bank, at the dates indicated:(Dollars in thousands)December 31, 2018 December 31, 2017Origin Bancorp, Inc.Amount Ratio Amount RatioCommon equity tier 1 capital (to risk-weighted assets)$519,468 11.94% $360,069 9.35%Tier 1 capital (to risk-weighted assets)528,786 12.16 433,338 11.25Total capital (to risk-weighted assets)564,437 12.98 472,437 12.26Tier 1 capital (to average assets)528,786 11.21 433,338 10.53 Origin Bank Common equity tier 1 capital (to risk-weighted assets)$508,826 11.73% $416,175 10.82%Tier 1 capital (to risk-weighted assets)508,826 11.73 416,175 10.82Total capital (to risk-weighted assets)544,477 12.55 455,274 11.84Tier 1 capital (to average assets)508,826 10.81 416,175 10.1356Item 7A. Quantitative and Qualitative Disclosures about Market RiskInterest Rate Sensitivity and Market RiskAs a financial institution, our primary component of market risk is interest rate volatility. Our financial management policy provides managementwith guidelines for effective funds management and we have established a measurement system for monitoring the net interest rate sensitivity position.Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and themarket value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is thepotential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss ofcurrent fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while atthe same time maximizing income.We manage exposure to interest rates by structuring the balance sheet in the ordinary course of business. Additionally, from time to time we enterinto derivatives and futures contracts to mitigate interest rate risk from specific transactions. Based upon the nature of operations, we are not subject toforeign exchange or commodity price risk. We have entered into interest rate swaps to mitigate interest rate risk in limited circumstances, but it is not ourpolicy to enter into such transactions on a regular basis.Our exposure to interest rate risk is managed by the Bank's Asset-Liability Management Committee in accordance with policies approved by theBank's board of directors. The committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interestrate risk, the committee considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regionaleconomies, liquidity, business strategies and other factors.The committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and marketvalues of assets and liabilities, unrealized gains and losses, purchase and sale activities,commitments to originate loans and the maturities of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility,maturities of deposits and consumer and commercial deposit activity. We employ methodologies to manage interest rate risk which include an analysis ofrelationships between interest-earning assets and interest-bearing liabilities, and an interest rate shock simulation model.We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, andthe impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model asare prepayment assumptions, maturity data and call options within the investment portfolio. The average life of non-maturity deposit accounts is based onour balance retention rates using a vintage study methodology. The assumptions used are inherently uncertain and, as a result, the model cannot preciselymeasure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ fromthe model's simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application andtiming of various management strategies.On a quarterly basis, we run various simulation models including a static balance sheet and dynamic growth balance sheet. These models test theimpact on net interest income and fair value of equity from changes in market interest rates under various scenarios. Under the static model, rates are shockedinstantaneously and ramped rates change over a twelve-month and twenty-four month horizon based upon parallel yield curve shifts. Parallel shock scenariosassume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Additionally, we run non-parallel simulation involvinganalysis of interest income and expense under various changes in the shape of the yield curve. Internal policy regarding interest rate risk simulationscurrently specifies that for instantaneous parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should notdecline by more than 8.0% for a 100 basis point shift, 15.0% for a 200 basis point shift, 20.0% for a 300 basis point shift, and 25.0% for a 400 basis pointshift. We continue to monitor our asset sensitivity and evaluate strategies to prevent being significantly impacted by declining interest rates in the nearfuture. As of December 31, 2018, we modeled outside of our internal policy limits in certain interest rate shock scenarios due to our asset sensitivity. Wecontinue to monitor our asset sensitivity and evaluate strategies to prevent being significantly impacted by declining interest rates in the future.The following table summarizes the impact of an instantaneous, sustained simulated change in net interest income and fair value of equity over a 12-month horizon at the date indicated: December 31, 2018Change in Interest Rates (basis points)% Change in Net InterestIncome % Change in Fair Value ofEquity+40019.2 % (3.6)%+30014.5 (2.8)+2009.7 (2.2)+1004.9 (1.3)Base -100(6.2) 1.2-200(15.3) 0.8We have found that, historically, interest rates on deposits change more slowly than changes in the discount and federal funds rates. This assumptionis incorporated into the simulation model and is generally not fully reflected in a gap analysis, meaning that process by which we measure the gap betweeninterest rate sensitive assets verses interest rate sensitive liabilities. The assumptions incorporated into the model are inherently uncertain and, as a result, themodel cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.Actual results will differ from the model's simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in marketconditions and the application and timing of various strategies.Impact of InflationOur consolidated financial statements and related notes included in Item 8 of this report have been prepared in accordance with U.S. GAAP. Theserequire the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of moneyover time due to inflation or recession. Inflation generally57increases the costs of funds and operating overhead, and to the extent loans and other assets bear variable rates, the yields on such assets. Unlike mostindustrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a moresignificant effect on the performance of a financial institution than the effects of general levels of inflation. In addition, inflation affects a financialinstitution's cost of goods and services purchased, the cost of salaries and benefits, occupancy expense and similar items. Inflation and related increases ininterest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings and stockholders' equity.58Item 8. Financial Statements and Supplementary DataORIGIN BANCORP, INC.Financial StatementsDECEMBER 31, 2018, 2017 and 2016INDEX Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM60 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets61 Consolidated Statements of Income62 Consolidated Statements of Comprehensive Income63 Consolidated Statements of Changes in Stockholders' Equity64 Consolidated Statements of Cash Flows66 Notes to Consolidated Financial Statements6859Report of Independent Registered Public Accounting FirmTo the Stockholders, Board of Directors and Audit CommitteeOrigin Bancorp, Inc.Ruston, LouisianaOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Origin Bancorp, Inc. (the "Company") as of December 31, 2018 and 2017, therelated consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the years in the three-year period endedDecember 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referredto above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations andits cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with accounting principles generally accepted in theUnited States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company'sconsolidated financial statements based on our audits.We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange 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 audit to obtainreasonable 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, andperforming procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ BKD, LLPWe have served as the Company's auditor since 2016.Little Rock, ArkansasFebruary 28, 201960ORIGIN BANCORP, INC.Consolidated Balance Sheets(Dollars in thousands, except per share amounts) December 31, 2018 2017Assets Cash and due from banks$71,008 $78,489Interest-bearing deposits in banks45,670 108,698Total cash and cash equivalents116,678 187,187Securities: Available for sale575,644 404,532Held to maturity (fair value of $19,136 and $20,265, respectively)19,169 20,188Securities carried at fair value through income11,361 12,033Total securities606,174 436,753Non-marketable equity securities held in other financial institutions42,149 22,967Loans held for sale ($21,562 and $32,768 at fair value, respectively)52,210 65,343Loans, net of allowance for loan losses of $34,203 and $37,083, respectively ($18,571 and $26,611 at fair value,respectively)3,754,902 3,203,948Premises and equipment, net75,014 77,408Mortgage servicing rights25,114 24,182Cash surrender value of bank-owned life insurance32,706 27,993Goodwill and other intangible assets, net32,861 24,336Accrued interest receivable and other assets83,768 83,878Total assets$4,821,576 $4,153,995Liabilities and Stockholders' Equity Noninterest-bearing deposits$951,015 $832,853Interest-bearing deposits2,027,720 2,060,068Time deposits804,403 619,093Total deposits3,783,138 3,512,014Federal Home Loan Bank ("FHLB") advances and other borrowings445,224 144,357Junior subordinated debentures, net9,644 9,619Accrued expenses and other liabilities33,791 32,663Total liabilities4,271,797 3,698,653Commitments and contingencies— 34,991Stockholders' equity: Preferred stock, no par value, 2,000,000 shares authorized: Preferred stock - Series SBLF (zero and 48,260 shares authorized; zero and 48,260 shares issued at December 31,2018, and December 31, 2017, respectively)— 48,260Preferred stock - Series D (zero and 950,000 shares authorized; zero and 901,644 shares issued at December 31,2018, and December 31, 2017, respectively)— 16,998Common stock ($5.00 par value; 50,000,000 shares authorized; 23,726,559 and 19,518,752 shares issued at December31, 2018, and December 31, 2017, respectively)118,633 97,594Additional paid‑in capital242,041 146,061Retained earnings191,585 145,122Accumulated other comprehensive (loss) income(2,480) 1,307 549,779 455,342Less: Retirement Plan-owned (formerly ESOP) shares— 34,991Total stockholders' equity549,779 420,351Total liabilities and stockholders' equity$4,821,576 $4,153,995The accompanying notes are an integral part of these consolidated financial statements.61ORIGIN BANCORP, INC.Consolidated Statements of Income(Dollars in thousands, except per share amounts) Years Ended December 31, 2018 2017 2016Interest and dividend income Interest and fees on loans$169,384 $138,858 $127,846Investment securities-taxable9,843 6,233 4,970Investment securities-nontaxable4,465 4,766 4,900Interest and dividend income on assets held in other financial institutions4,396 2,736 1,435Federal funds sold8 — —Total interest and dividend income188,096 152,593 139,151Interest expense Interest-bearing deposits29,671 19,314 15,250FHLB advances and other borrowings4,420 2,426 2,672Subordinated debentures553 548 546Total interest expense34,644 22,288 18,468Net interest income153,452 130,305 120,683Provision for credit losses1,014 8,336 30,078Net interest income after provision for credit losses152,438 121,969 90,605Noninterest income Service charges and fees12,754 11,606 11,019Mortgage banking revenue9,620 15,806 14,869Insurance commission and fee income9,720 7,207 6,775(Loss) gain on sales of securities, net(8) — 136Loss on non-mortgage loans held for sale, net— (12,708) —(Loss) gain on sales and disposals of other assets, net(170) 1,036 (515)Other fee income1,811 2,176 2,970Other income7,513 4,064 6,614Total noninterest income41,240 29,187 41,868Noninterest expense Salaries and employee benefits80,487 70,862 63,605Occupancy and equipment, net15,445 15,915 17,127Data processing6,182 5,209 4,837Electronic banking2,883 2,056 2,365Communications2,028 1,928 2,474Advertising and marketing4,275 2,923 2,849Professional services3,269 4,722 4,587Regulatory assessments2,457 2,867 3,229Loan related expenses3,039 4,419 3,873Office and operations5,881 5,498 6,003Litigation settlement— 10,000 —Other expenses5,290 4,275 5,758Total noninterest expense131,236 130,674 116,707Income before income tax expense62,442 20,482 15,766Income tax expense10,837 5,813 2,916Net income$51,605 $14,669 $12,850Preferred stock dividends$1,923 $4,461 $4,398Net income allocated to participating stockholders1,029 377 316Net income available to common stockholders$48,653 $9,831 $8,136Basic earnings per common share$2.21 $0.51 $0.46Diluted earnings per common share2.20 0.50 0.46The accompanying notes are an integral part of these consolidated financial statements.62ORIGIN BANCORP, INC.Consolidated Statements of Comprehensive Income(Dollars in thousands) Years Ended December 31, 2018 2017 2016Net income$51,605 $14,669 $12,850Other comprehensive income (loss) Securities available for sale and transferred securities: Net unrealized holding losses arising during the period(5,260) (3,414) (2,599)Net losses realized as a yield adjustment in interest on investment securities(10) (10) (9)Reclassification adjustment for net losses (gains) included in net income8— (136)Change in the net unrealized losses on investment securities, before tax(5,262) (3,424) (2,744)Income tax benefit related to net unrealized losses arising during the period(1,105) (1,199) (960)Change in the net unrealized loss on investment securities, net of tax(4,157) (2,225) (1,784)Cash flow hedges: Net unrealized gains (losses) arising during the period104 4 (60)Reclassification adjustment for losses included in net income7 102 157Change in the net unrealized gain on cash flow hedges, before tax111 106 97Income tax expense related to net unrealized gains on cash flow hedges23 37 34Change in the net unrealized gain on cash flow hedges, net of tax88 69 63Other comprehensive loss, net of tax(4,069) (2,156) (1,721)Comprehensive income$47,536 $12,513 $11,129The accompanying notes are an integral part of these consolidated financial statements.63ORIGIN BANCORP, INC.Consolidated Statements of Changes in Stockholders' Equity(Dollars in thousands, except per share amounts) CommonSharesOutstanding Preferred StockSeriesSBLF Preferred StockSeries D CommonStock Additional Paid-InCapital RetainedEarnings UnallocatedRetirementPlan Shares AccumulatedOtherComprehensiveIncome (loss) Less:RetirementPlan-OwnedShares TotalStockholders'EquityBalance at January 1,2016(1) 17,399,534 $48,260 $15,000 $43,549 $155,584 $131,328 $(465) $5,184 $(25,507) $372,933Net income — — — — — 12,850 — — — 12,850Other comprehensive loss,net of tax — — — — — — — (1,721) — (1,721)Recognition of stockcompensation, net 89,269 — — 484 1,061 — — — — 1,545Net change in RetirementPlan-owned (formerlyESOP) shares 40,292 — — — — — 465 — 44 509Net change in fair value ofRetirement Plan-owned(formerly ESOP) shares — — — — — — — — (3,101) (3,101)Stock issuance - Common 1,954,623 — — 9,773 32,036 — — — — 41,809Stock issuance - Preferred — — 1,998 — — — — — — 1,998Two for one commonstock split in the form ofa 100% dividend — — — 43,613 (43,613) — — — — —Dividends declared - SeriesSBLF preferred stock — — — — — (4,290) — — — (4,290)Dividends declared - SeriesD preferred stock — — — — — (108) — — — (108)Dividends declared -common stock ($0.13per share)(1) — — — — — (2,331) — — — (2,331)Balance at December 31,2016 19,483,718 48,260 16,998 97,419 145,068 137,449 — 3,463 (28,564) 420,093Net income — — — — — 14,669 — — — 14,669Other comprehensive loss,net of tax — — — — — — — (2,156) — (2,156)Recognition of stockcompensation, net 35,034 — — 175 750 — — — — 925Tax benefit of 2016 stockissuance costs — — — — 243 — — — — 243Net change in fair value ofRetirement Plan-owned(formerly ESOP) shares — — — — — — — — (6,427) (6,427)Dividends declared - SeriesSBLF preferred stock — — — — — (4,344) — — — (4,344)Dividends declared - SeriesD preferred stock — — — — — (117) — — — (117)Dividends declared -common stock ($0.13per share) — — — — — (2,535) — — — (2,535)Balance at December 31,2017 19,518,752 48,260 16,998 97,594 146,061 145,122 — 1,307 (34,991) 420,351The accompanying notes are an integral part of these consolidated financial statements.64ORIGIN BANCORP, INC.Consolidated Statements of Changes in Stockholders' Equity(Dollars in thousands, except per share amounts)(continued) CommonSharesOutstanding Preferred StockSeriesSBLF Preferred StockSeries D CommonStock Additional Paid-InCapital RetainedEarnings UnallocatedRetirementPlan Shares AccumulatedOtherComprehensiveIncome (loss) Less:RetirementPlan-OwnedShares TotalStockholders'EquityNet income — — — — — 51,605 — — — 51,605Other comprehensiveloss, net of tax — — — — — — — (4,069) — (4,069)Reclassification of taxeffects related to theadoption of ASU2018-02 — — — — — (282) — 282 — —Recognition of stockcompensation, net 193,913 — — 970 1,028 — — — — 1,998Terminated RetirementPlan (formerlyESOP) put option — — — — — — — — 34,991 34,991Stock issuance -common 3,045,426 — — 15,227 80,090 — — — — 95,317Stock issuance - RCFacquisition 66,824 — — 334 2,372 — — — — 2,706Redemption ofpreferred stock -Series SBLF — (48,260) — — — — — — — (48,260)Conversion of preferredstock - Series D tocommon stock 901,644 — (16,998) 4,508 12,490 — — — — —Dividends declared -Series SBLFpreferred stock — — — — — (1,894) — — — (1,894)Dividends declared -Series D preferredstock — — — — — (29) — — — (29)Dividends declared -common stock($0.13 per share) — — — — — (2,937) — — — (2,937)Balance at December31, 2018 23,726,559 $— $— $118,633 $242,041 $191,585 $— $(2,480) $— $549,779____________________________(1) Presentation for 2016 beginning share and per share amounts has been adjusted to reflect a 2-for-1 stock split that occurred on October 5, 2016.The accompanying notes are an integral part of these consolidated financial statements.65ORIGIN BANCORP, INC.Consolidated Statements of Cash Flows(Dollars in thousands) Years Ended December 31,Cash flows from operating activities:2018 2017 2016Net income$51,605 $14,669 $12,850Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses1,014 8,336 30,078Depreciation and amortization5,869 5,852 7,848Net amortization on securities1,138 1,416 1,347Amortization of investments in tax credit funds1,899 2,629 2,251Net realized loss (gain) on securities sold8 — (136)Deferred income tax expense5,637 4,931 1,400Stock-based compensation expense1,462 1,150 1,547Originations of mortgage loans held for sale(300,093) (500,234) (745,320)Proceeds from mortgage loans held for sale309,153 517,326 754,667Gain on mortgage loans held for sale, including origination of servicing rights(6,403) (11,615) (12,546)Net loss (gain) on disposals of premises and equipment75 (1,434) 198Loss on non-mortgage loans held for sale— 12,708 —Increase in the cash surrender value of life insurance(713) (631) (708)Gain on equity securities without a readily determinable fair value(1,977) — —Net losses on sales and write downs of other real estate owned95 398 328Other operating activities, net9,057 6,487 774Net cash provided by operating activities77,826 61,988 54,578Cash flows from investing activities: Cash paid for business combinations, net of cash acquired(6,596) — —Purchases of securities available for sale(477,548) (443,033) (465,690)Maturities, paydowns and calls of securities available for sale279,152 409,180 433,361Proceeds from sales of securities available for sale20,877 — 7,136Maturities, paydowns and calls of securities held to maturity1,018 520 513Paydowns of securities carried at fair value414 381 673Net purchases of non-marketable equity securities held in other financial institutions(17,026) (3,199) (318)Paydowns and proceeds from non-mortgage loans held for sale— 13,260 —Originations of mortgage warehouse loans(4,495,650) (4,343,469) (3,677,464)Proceeds from pay-offs of mortgage warehouse loans4,542,822 4,344,800 3,722,658Net increase in loans, excluding mortgage warehouse and loans held for sale(601,153) (179,383) (169,338)Purchase of bank-owned life insurance(4,000) — —Return of capital on limited partnership investments456 844 3,598Capital calls on limited partnership investments(2,838) (2,175) (3,805)Purchases of premises and equipment(5,482) (3,031) (7,925)Proceeds from sales of premises and equipment111 4,411 44Proceeds from sales of other real estate owned516 3,244 1,852Net cash used in investing activities(764,927) (197,650) (154,705)The accompanying notes are an integral part of these consolidated financial statements.66ORIGIN BANCORP, INC.Consolidated Statements of Cash Flows(Dollars in thousands) Years Ended December 31,Cash flows from financing activities:2018 2017 2016Net increase in deposits271,124 68,748 55,446Proceeds from FHLB advances250,000 — 2,975Repayments on FHLB advances(51,342) (1,294) (4,141)Net increase (decrease) in other borrowed funds101,164 — (3,600)Net increase (decrease) in securities sold under agreements to repurchase4,135 2,733 (4,933)Dividends paid(5,941) (6,996) (5,764)Taxes paid related to net share settlement of equity awards(25) (348) (739)Cash received from exercise of stock options559 123 737Proceeds from issuance of common stock, net of offering expenses95,178 — 41,809Redemption of Series SBLF preferred stock(48,260) — —Proceeds from issuance of preferred stock— — 1,998Net cash provided by financing activities616,592 62,966 83,788Net decrease in cash and cash equivalents(70,509) (72,696) (16,339)Cash and cash equivalents at beginning of period187,187 259,883 276,222Cash and cash equivalents at end of period$116,678 $187,187 $259,883 Interest paid$34,390 $22,686 $18,564Income taxes paid6755,268 7,091Significant non-cash transactions: Real estate acquired in settlement of loans1,057749 3,729Conversion of Series D preferred stock to common stock16,998 — —Fair value of common stock issued in conjunction with business combination2,706 — —The accompanying notes are an integral part of these consolidated financial statements.67Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 1 - Significant Accounting PoliciesNature of Operations. Origin Bancorp, Inc. ("Company") is a financial holding company headquartered in Ruston, Louisiana. The Company'swholly owned bank subsidiary, Origin Bank ("Bank"), provides a broad range of financial services to businesses, municipalities, high net worth individualsand retail clients. The Company currently operates 41 banking centers located in North Louisiana, Central Mississippi, Dallas/Fort Worth and Houston,Texas. 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 Thomas & Farr,and Reeves, Coon and Funderburg ("RCF"). All significant intercompany balances and transactions have been eliminated in consolidation. The Company'saccounting 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 disclosurethrough 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 noeffect 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 theentity 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 investmentat risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right toreceive residual returns and the right to make decisions about the entity's activities. The Company consolidates voting interest entities in which it has all, orat 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 avoting 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 mostsignificantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant tothe VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The Company's wholly ownedsubsidiaries CTB Statutory Trust I and First Louisiana Statutory Trust I are VIEs for which the Company is not the primary beneficiary. Accordingly, theaccounts 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 evaluatedregularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Bank is the only significantsubsidiary upon which management makes decisions regarding how to allocate resources and assess performance. Individual bank branches offer a group ofsimilar services, including commercial, real estate and consumer loans, time deposits, checking and savings accounts, all with similar operating andeconomic characteristics. While the chief operating decision-maker monitor the revenue streams of the various products and services, operations are managedand financial performance is evaluated on a Company-wide basis. Accordingly, all of the community banking services and branch locations are consideredby management to be aggregated into one reportable operating segment, community banking.Use of Estimates. To prepare financial statements in conformity with U.S. GAAP, management makes estimates and assumptions based onavailable information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actualresults could differ. Material estimates that are subject to significant change in the near term are the allowance for loan losses, valuation of other real estateowned, fair value of mortgage servicing rights, realization of deferred tax assets, fair values of financial instruments and the status of contingencies. Actualresults could differ from those estimates.Cash and Cash Equivalents. For purposes of the statement of cash flows, the Company considers all cash on hand, demand deposits with otherbanks, federal funds sold and short term interest-bearing cash items with an original maturity less than 90 days to be cash equivalents. The Companymaintains deposits with other financial institutions in amounts that exceed federal deposit insurance coverage. Furthermore, federal funds sold are essentiallyuncollateralized loans to other financial institutions. Management regularly evaluates the credit risk associated with the counterparties to these transactionsand believes that the Company is not exposed to any significant credit risks on cash and cash equivalents.68Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsAt December 31, 2018 and 2017 the Company had cash collateral required to be held with counterparties on certain derivative transactions asdiscussed in Note 11 - Derivative Financial Instruments. At December 31, 2018, and 2017 the Company had no reserve requirement for cash balances with theFederal Reserve.Securities. The Company accounts for debt and equity securities as follows:Available for Sale ("AFS") - Debt and equity securities that will be held for indefinite periods of time, including securities that may be sold inresponse to changes in market interest or prepayment rates, needs for liquidity and changes in the availability of and the yield of alternative investments areclassified as AFS. These assets are carried at fair value. Fair value is determined using published quotes. If quoted market prices are not available, fair valuesare based on other methods including, but not limited to the discounting of cash flows.Held to Maturity ("HTM") - Debt securities that management has the positive intent and ability to hold until maturity are classified as HTM and arecarried at their remaining unpaid principal balance, net of unamortized premiums or unaccreted discounts.Securities Carried at Fair Value through Income - Debt securities for which the Company has elected the fair value option for accounting areclassified as securities carried at fair value through income. Management has elected the fair value option for these items to offset the corresponding changein fair value of related interest rate swap agreements. Fair value is determined using discounted cash flows and credit quality indicators. Changes in fair valueare reported through the consolidated statements of income as a part of other noninterest income.Unrealized gains and losses on AFS securities are excluded from earnings and reported net of tax in accumulated other comprehensive income untilrealized. Declines in the fair value of AFS and HTM securities below their cost are reflected in earnings as realized losses to the extent the impairment isdeemed to be other-than-temporary credit losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and theextent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) management's intent and abilityto retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The amount of the impairment related toother factors is recognized in other comprehensive income unless there is no ability or intent to hold to recovery.Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities to the earlier of the calldate or maturity date. Gains and losses on the sale of securities are recorded on the trade date 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 ReserveBank 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 nothave readily determinable fair values. The Company's remaining equity investments in other financial institutions, totaling $11.7 million and $7.5 million atDecember 31, 2018 and 2017, respectively, qualify for the practicability exception under Accounting Standards Update ("ASU") 2016-01 due to havingilliquid markets and are carried at cost, less impairment, plus or minus any observable price changes. The carrying value of these securities was evaluated andwas determined not to be impaired for the years ended December 31, 2018, 2017 and 2016.Loans Held for Sale. Loans held for sale include mortgage loans and are carried at fair value, with unrealized gains and losses recorded in theconsolidated statements of income.Forward commitments to sell mortgage loans are acquired to reduce market risk on mortgage loans in the process of origination and mortgage loansheld for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are mandatory forward commitments, and theCompany is required to substitute another loan or to buy back the commitment if the original loan does not fund. Typically, the Company delivers themortgage 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 determinedby 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 itbecomes evident that the commitment will not be used.69Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsLoans. Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are reported at theiroutstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interestincome is accrued on the unpaid principal balance. Loan origination fees, and certain direct origination costs, are deferred and amortized as a yieldadjustment over the lives of the related loans using the interest method. Late fees are recognized as income when earned, assuming collectability isreasonably assured.The Company has elected the fair value option on a small portion of its loans held for investment, with changes in fair value recorded in noninterestincome. For these loans, the earned current contractual interest payment is recognized in interest income. Loan origination costs and fees are recognized inearnings as incurred and not deferred. Because these loans are recognized at fair value, the Company's allowance for loan losses policy does not apply tothese loans. Fair value is determined using discounted cash flows and credit quality indicators.In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans andclassifies 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 economicand business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Whenaccrual of interest is discontinued, all unpaid accrued interest is reversed. Past due status is based on contractual terms of the loan. Interest income onnonaccrual loans may be recognized to the extent cash payments are received, but payments received are usually applied to principal. Nonaccrual loans aregenerally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at leastsix months, and the Company reasonably expects to collect all principal and interest.Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loanlosses charged to earnings. The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review ofthe collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower'sability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requiresestimates that are susceptible to significant revision as more information becomes available. Loans are charged off against the allowance for loan losses whenmanagement believes the loss is confirmed. Subsequent recoveries, if any, are credited to the allowance.The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired, and anallowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying valueof that loan. The general component relates to loans that are not classified as impaired and is based on historical charge-off experience and the expected loss,given default, derived from the Company's internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessmentof internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.Delinquency statistics are updated at least monthly and are the most meaningful indicator of the credit quality of one-to-four single familyresidential, home equity loans and lines of credit and other consumer loans. Internal risk ratings are considered the most meaningful indicator of creditquality for commercial and industrial, construction, and commercial real estate loans. Internal risk ratings are a key factor in identifying loans that areindividually evaluated for impairment and impact management's estimates of loss factors used in determining the amount of the allowance for loan losses.Internal risk ratings are updated on a regular basis.A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect thescheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management indetermining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.Impaired loans include nonperforming loans and loans modified in troubled debt restructurings ("TDRs"). TDRs are loans for which the contractual terms onthe loan have been modified and both of the following conditions exist: (1) the borrower is experiencing financial difficulty and (2) the restructuringconstitutes a concession. Concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance orother actions intended to maximize collection. The Company assesses all loan modifications to determine whether they constitute a TDR. All TDRs areconsidered impaired loans. Impairment is70Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statementsmeasured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainablemarket price or the fair value of the collateral if the loan is collateral dependent.Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines thesignificance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan andthe borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation tothe principal and interest owed.Premises and Equipment, net. Land is carried at cost. Buildings and improvements are stated at cost less accumulated depreciation computedusing 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 atcost less accumulated depreciation computed using the straight-line method over the estimated useful lives of the assets, which range from three to sevenyears. Leasehold improvements are capitalized and depreciated using the straight-line method over the estimated useful lives of the leasehold improvementsor the expected terms of the leases, if shorter.Mortgage Servicing Rights and Transfers of Financial Assets. Gains or losses on "servicing-retained" loan sale transactions generally include acomponent reflecting the differential between the contractual interest rate of the loan and the interest rate to be received by the investor. The present value ofthe 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 soldservicing-retained, the fair value of mortgage servicing rights is recorded as an asset, with their value estimated using a discounted cash flow methodology toarrive 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 asincome when earned.Loans sold into the secondary market are considered transfers of financial assets. These transfers are accounted for as sales when control over theasset 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 inbankruptcy or other receivership situations; the transferee obtains the unconditional right to pledge or exchange the asset; or the transfer does not include arepurchase provision above the limited recourse provisions of these loan sales.Derivative Instruments and Hedging Activities. All derivatives are recorded on the accompanying consolidated balance sheets at fair value. Theaccounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate aderivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedgeaccounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitmentattributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure tovariability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides forthe 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 orliability 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. Duringthe term of a cash flow hedge contract the effective portion of changes in fair value in the derivative instrument are recorded in accumulated othercomprehensive income. Changes in the fair value of derivatives to which hedge accounting does not apply are recognized immediately in earnings. Note 11 -Derivative Financial Instruments describes the derivative instruments currently used by the Company and discloses how these derivatives impact itsconsolidated balance sheets and statements of income.Goodwill and Other Intangible Assets. Goodwill, which represents the excess of cost over the fair value of the net assets of an acquired business, isnot amortized but tested for impairment on an annual basis, which is October 1 for the Company, or more often if events or circumstances indicate that theremay be impairment. Other intangible assets, such as relationship based intangibles and core deposit intangibles, are amortized on a basis consistent with thereceipt of economic benefit to us. Such assets are evaluated at least annually as to the recoverability of their carrying value for potential impairment. In thequarter following the period in which identified intangible assets become fully amortized, the fully amortized balances are removed from the gross asset andaccumulated amortization amounts.Other Real Estate Owned. Other real estate owned ("OREO") represents properties acquired through foreclosure or acceptance of a deed in lieu offoreclosure on loans on which the borrowers have defaulted as to payment of71Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statementsprincipal and interest. OREO also includes bank-owned real estate which the Company is no longer utilizing and intends to sell. These properties are initiallyrecorded 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. Anysubsequent capital improvements that increase value are added to the balance of the properties. Any valuation adjustments required at the date of transferfrom loans to OREO are charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair value, or gains and losses on the sale ofthe properties are charged to noninterest income. At December 31, 2018 and 2017 the balance of OREO was $3.7 million and $499,000, respectively, andincluded as a component of 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 obligationto repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective controlthrough an agreement that both entitles and obligates it to repurchase the assets. Securities sold under agreements to repurchase generally mature on thebanking day following that on which the investment was initially sold and are treated as collateralized financing transactions which are recorded at theamounts at which the securities were sold plus accrued interest. Interest rates and maturity dates of the securities involved vary and are not intended to bematched with funds from customers.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 managementactivities associated with the mortgage pipeline and mortgage servicing rights ("MSRs"). This revenue category also includes gains and losses on sales andchanges 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 ofMSRs 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 andliabilities, 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 taxexamination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized onexamination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company did not have any amount accrued withrespect to uncertainty in income taxes at December 31, 2018 or 2017.The Company recognizes interest and/or penalties related to income tax matters as a component of noninterest expense. There were no penalties orrelated interest for the years ended December 31, 2018, 2017 or 2016. Federal income tax expense or benefit has been allocated to subsidiaries on a separatereturn basis.Stock-Based Compensation. The cost of employee services received in exchange for stock options or restricted stock grants are measured using thefair value of the award on the grant date and is recognized over the service period. During 2016, the Company adopted the amendments outlined in ASU No.2016-09 — Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The adoption of the ASU didnot have a significant impact on its consolidated financial statements or disclosures.Other Investments. The Company accounts for investments in limited partnerships, limited liability companies ("LLCs"), and other privately heldcompanies using either the equity method of accounting or at amortized cost net of impairments and observable price changes. The accounting treatmentdepends 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 isincreased or decreased to reflect its share of income or loss of the investee. The Company's recognition of earnings or losses from an equity methodinvestment 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 readilyavailable. Management evaluates the investments in investees for impairment based on the72Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statementsinvestee's ability to generate cash through its operations or obtain alternative financing, and other subjective factors. There are inherent risks associated withinvestments in such companies, which may result in volatility in the consolidated statements of income in future periods.At December 31, 2018, and 2017, investments in limited partnerships, LLCs and other privately held companies totaled $14.5 million and $11.3million, respectively, and were included in other assets in the accompanying consolidated balance sheets.Investments in Tax Credit Entities. As part of its Community Reinvestment Act responsibilities and due to their favorable economiccharacteristics, the Company invests in tax credit-motivated projects primarily in the markets it serves. These projects are directed at tax credits issued underLow-Income Housing Tax Credits. The Company generates returns on tax credit motivated projects through the receipt of federal, and if applicable, state taxcredits. 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 to15 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 carriedforward 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 thatmust 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 inthe 0.1% interest general partner, who has the power and authority to make decisions that impact economic performance of the project and is required tooversee and manage the project. Due to the lack of any voting, economic, or managerial control, and due to the contractual reduction in the investment, theCompany accounts for its investment by amortizing the investment, beginning at the issuance of the certificate of occupancy of the project, over thecompliance period, as management believes any potential residual value in the real estate will have limited value. Amortization is included as a componentof 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 haveoccurred to date. At December 31, 2018, and 2017, the Company had investments in tax credit entities of $10.6 million and $12.5 million, respectively,which are included in other assets in the accompanying consolidated balance sheets.Earnings Per Share. Basic earnings per common share is calculated using the two-class method. The two-class method is an earnings allocationformula that determines earnings per share for each share of common stock and participating securities according to dividends declared (distributed earnings)and participation rights in undistributed earnings. Distributed and undistributed earnings are allocated between common and participating securitystockholders based on their respective rights to receive dividends. Share-based payment awards that contain nonforfeitable rights to dividends or dividendequivalents are considered participating securities (e.g., restricted stock grants). Preferred stock that receives dividends based on dividends paid on commonstock is also considered a participating security (e.g., Series D preferred stock). Undistributed net losses are not allocated to holders of participating securities,as they do not have a contractual obligation to fund the losses incurred by the Company. Net income attributable to common stockholders is then divided bythe weighted average number of common shares outstanding during the period, net of participating securities and reduced for average unallocated shares heldby the Company's Employee Retirement Plan ("Retirement Plan").Diluted income per common share considers common stock issuable under the assumed release of unvested restricted stock awards, convertiblepreferred stock being converted to common stock, and the assumed exercise of stock options granted. The dilutive effect of share-based payment awards thatare not deemed to be participating securities is calculated using the treasury stock method, which assumes that the proceeds from exercise are used topurchase common stock at the average market price for the period. The dilutive effect of participating securities is calculated using the more dilutive of thetreasury stock method (which assumes that the participating securities are exercised/released) or the two-class method (which assumes that the participatingsecurities are not exercised/released and earnings are reallocated between common and participating security stockholders). Potentially dilutive commonstock equivalents are excluded from the computation of diluted earnings per common share in periods in which the effect would be antidilutive.73Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsEffect of Recently Adopted Accounting StandardsASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from AccumulatedOther Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings forstranded tax effects resulting from the Tax Cuts and Jobs Act. Since these amendments only relate to the reclassification of the income tax effects of the TaxCuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations isnot affected. These amendments require that an entity disclose a description of the accounting policy for releasing income tax effects from accumulated othercomprehensive income. These amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. Earlyadoption is permitted, including adoption in any interim period, for reporting periods for which financial statements have not yet been issued. Theseamendments should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporateincome tax rate in the Tax Cuts and Jobs Act is recognized. Rather than adjusting income tax expense for the differences as the effect of the change in theU.S. federal corporate income tax rates are realized, the Company elected to adjust the difference (stranded tax effect) to retained earnings, consistent with thetreatment of the deferred tax adjustment. The Company adopted this guidance during the first quarter of 2018, which resulted in a reclassification of$282,000 from accumulated other comprehensive income to retained earnings. The Company's policy is to release material stranded tax effects on a specificidentification basis.ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 permits hedgeaccounting for risk components in hedging relationships involving nonfinancial risk and interest rate risk. It also changes the guidance for designating fairvalue hedges of interest rate risk and for measuring the change in fair value of the hedged item in fair value hedges of interest rate risk. In addition to theamendments to the designation and measurement guidance for qualifying hedging relationships, the amendments in this ASU also align the recognition andpresentation of the effects of the hedging instrument and the hedged item in the consolidated financial statements. This ASU requires an entity to present theearnings effect of the hedging instrument in the same line item in the statement of income in which the earnings effect of the hedged item is reported. Forpublic entities, these amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Earlyapplication is permitted. The Company has analyzed its hedges and determined that the amendments in this ASU are currently not applicable to any hedgerelationships in effect and therefore, no transition adjustment is necessary. The Company has adopted this ASU during the first quarter of 2018, and willapply the updates to hedging instruments prospectively.ASU No. 2016-15 —Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 adds orclarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The Company adopted this guidance on January1, 2018, and, as a result, reclassified $844,000 and $3.6 million, of return of capital proceeds from limited partnership investments from operating activities toinvesting activities for the year ended December 31, 2017 and 2016, respectively.ASU No. 2016-01 —Financial Instruments —Overall (Subtopic 825-10). The Company adopted this update effective January 1, 2018. The mainprovisions are to eliminate the AFS classification of accounting for equity securities and to adjust the fair value disclosures for financial instruments carriedat amortized cost such that the disclosed fair values represent an exit price as opposed to an entry price. The majority of the Company's equity investmentsqualify for the practical expedient allowed for equity securities without a readily determinable fair value, such that the Company has elected to carry thesesecurities at cost adjusted for any observable transactions during the period, less any impairment. To date, no impairment has been recorded on theCompany's investments in equity securities which do not have readily determinable fair values. The disclosure of fair value of the loan and interest-bearingdeposit portfolios has been presented using an exit price methodology and had an immaterial impact on the Company's financial position. ASU No. 2014-09 —Revenue from Contracts with Customers (Topic 606). The Company adopted this ASU on January 1, 2018, which outlines asingle comprehensive revenue recognition model for entities to follow in accounting for revenue from contracts with customers. The implementation of thisnew guidance did not have a material impact on the measurement or recognition of revenue and no cumulative effect adjustment was recorded to openingretained earnings. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts were not adjustedand continue to be reported in accordance with the Company's historic accounting under Topic 605.The majority of the Company's revenue is generated from sources outside the scope of Topic 606. Interest and fees on loans, income from investmentsecurities and mortgage banking revenue are all outside the scope of Topic 606 and are74Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statementsrecorded in adherence with U.S. GAAP. Service charges and fees on deposit accounts, credit card interchange, insurance commission and fee income, as wellas gains and losses on the sale of other assets including OREO are within the scope of Topic 606; however, the recognition of these revenue streams did notchange significantly upon adoption of Topic 606. Descriptions of the Company's revenue generating activities that are within the scope of Topic 606 aredescribed below.Service charges and fees on deposit accountsService charges and fees on deposit accounts are primarily comprised of maintenance fees, service fees, stop payment and insufficient fundsfees. 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 relatedrevenue recognized, at a point in time.Insurance commission and fee incomeThe Company earns commission income through production on behalf of insurance carriers and also earns fee income by providingcomplementary services such as collection of premiums. In most instances the Company considers the performance obligation to be complete at the time theservice was rendered.Credit card interchange incomeThe Company records credit card interchange income at a point in time as card transactions occur. The Company's performance obligationfor these transactions is deemed to have occurred upon completion of each transaction. The amounts are included as a component of other income in theconsolidated statements of income.Gain or loss on sale of other assets and OREOIn the normal course of business, the Company recognizes the sale on other assets and OREO, along with any gain or loss, when control ofthe property transfers to the buyer through an executed contractual agreement. The transaction price is fixed, and on occasion the Company will finance aportion of the purchase price of the transferred asset.ASU No. 2018-15, Intangibles, Goodwill and Other, Internal Use Software - (Topic 350-40): Customer's Accounting for Implementation CostsIncurred in a Cloud Computing Arrangement that is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementationcosts incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtaininternal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments require an entity (customer) in ahosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an assetrelated to the service contract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementationcosts of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. For publicbusiness entities that file reports with the Securities and Exchange Commission ("SEC"), the amendments in the update are effective for fiscal years beginningafter December 15, 2019, including interim periods within those fiscal years, early adoption is permitted.The Company prospectively adopted ASU 2018-15 effective October 1, 2018. As a result of this implementation, capitalized costs relating tointernal use software totaled $455,000 at December 31, 2018, and will be expensed over the useful life of the contract rather than expensed as incurred. Theasset will be reflected on the consolidated balance sheets in accrued interest receivable and other assets and the related amortization expense will be reflectedin data processing expense on the consolidated statements of income.Effect of Newly Issued But Not Yet Effective Accounting StandardsASU No. 2018-13, Fair Value Measurement - (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair ValueMeasurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based onthe concepts in Financial Accounting Standards Board ("FASB") Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes toFinancial Statements, including the consideration of costs and benefits. For public business entities that file reports with the SEC, the amendments in theupdate are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating theimpact of this ASU on the consolidated financial statements and disclosures.75Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, andreasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, aswell as the credit quality and underwriting standards of an organization's portfolio. In addition, ASU 2016-13 amends the accounting for credit losses onavailable-for-sale debt securities and purchased financial assets with credit deterioration. The Company is currently evaluating the potential impact ofASU 2016-13 to the consolidated financial statements. In that regard, the Company has formed a working group comprised of individuals from variousfunctional areas including credit, risk management, finance and information technology, among others. The Company is currently working through animplementation plan which includes assessment and documentation of processes, internal controls and data sources; model development and documentation;and system configuration. The Company is also in the process of implementing a third-party vendor solution to assist us in the application of the ASU 2016-13. The adoption of the ASU 2016-13 could result in an increase in the allowance for loan losses as a result of changing from an "incurred loss" model, whichencompasses allowances for current known and inherent losses within the portfolio, to an "expected loss" model, which encompasses allowances for lossesexpected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate the establishment of an allowance for expected credit lossesfor certain debt securities and other financial assets. While the Company is currently unable to reasonably estimate the impact of adopting ASU 2016-13, theimpact of adoption is expected to be significantly influenced by the composition, characteristics and quality of the Company's loan and securities portfoliosas well as the prevailing economic conditions and forecasts as of the adoption date. For public business entities that file reports with the SEC, theamendments in the update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to put most leases on their balance sheets but recognize expenses in theconsolidated statements of income in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initialdirect costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. Forpublic business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. ASU No. 2018-11, Leases(Topic 842), Targeted Improvements, allows entities with an additional (and optional) transition method to adopt the new lease requirements by allowingthem to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.The Company will make use of this transition option guidance and has finalized the review of key assumptions. Based on its analysis, the Company expectsthe overall impact to the consolidated balance sheets reflected in the right-of-use asset and corresponding lease obligation liability will be approximately$26.0 million at adoption. The Company adopted this ASU as of January 1, 2019, and the cumulative effect adjustment to retained earnings upon adoptionwas immaterial.76Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 2 - Earnings Per Share(Dollars in thousands, except per share amounts)Years Ended December 31,Basic earnings per common share2018 2017 2016Net income$51,605 $14,669 $12,850Less: Dividends to preferred stock (1)1,923 4,461 4,398Net income allocated to participating stockholders (1) (2)1,029 377 316Net income available to common stockholders (3)$48,653 $9,831 $8,136Weighted average common shares outstanding (4)21,995,990 19,418,278 17,545,655Basic earnings per common share$2.21 $0.51 $0.46Diluted earnings per common share Diluted earnings applicable to common stockholders (3)$48,819 $9,861 $8,136Weighted average diluted common shares outstanding: Weighted average common shares outstanding (4)21,995,990 19,418,278 17,545,655Dilutive effect of common stock options198,439 216,134 187,406Weighted average diluted common shares outstanding22,194,429 19,634,412 17,733,061Diluted earnings per common share$2.20 $0.50 $0.46____________________________(1) Participating stockholders include those that hold certain share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents. Such shares orunits are considered participating securities (i.e., nonvested restricted stock grants). Additionally, for period prior to June 30, 2018, Series D preferred stockholders wereparticipating stockholders as those shares participate in dividends with common shares on a one for one basis. Net income allocated to participating stockholders does notinclude dividends paid to preferred stockholders.(2) The average participating share count for the calculation of earnings per share for the year ended December 31, 2018, includes an allocation for Series D preferredstockholders, which were converted to common stock during the quarter ended June 30, 2018.(3) Net income available to common stockholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common stock equivalentsfor options to dilutive shares outstanding, which alters the ratio used to allocate earnings to common stockholders and participating securities for the purposes of calculatingdiluted earnings per share.(4) Presentation for 2016 share and per share amounts has been adjusted to reflect a 2-for-1 stock split that occurred on October 5, 2016.77Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 3 - SecuritiesThe following table is a summary of the amortized cost and estimated fair value, including gross unrealized gains and losses, of available for sale,held to maturity and securities carried at fair value through income for the dates indicated:(Dollars in thousands)December 31, 2018AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValueAvailable for sale: State and municipal securities$99,780$1,266$(163) $100,883Corporate bonds10,997102(65) 11,034U.S. government and agency securities61,122 82 (54) 61,150Commercial mortgage-backed securities16,672 94 — 16,766Residential mortgage-backed securities188,058 417 (2,160) 186,315Residential collateralized mortgage obligations202,422315(3,241) 199,496Total$579,051 $2,276 $(5,683) $575,644Held to maturity: State and municipal securities$19,169$—$(33) $19,136Securities carried at fair value through income: State and municipal securities(1)$11,503$—$—$11,361 December 31, 2017 Available for sale: State and municipal securities$125,909 $4,104 $(35) $129,978Corporate bonds3,000 136 — 3,136Residential mortgage-backed securities105,132 492 (595) 105,029Residential collateralized mortgage obligations168,645 262 (2,518) 166,389Total$402,686 $4,994 $(3,148) $404,532Held to maturity: State and municipal securities$20,188 $77 $— $20,265Securities carried at fair value through income: State and municipal securities(1)$11,918 $— $— $12,033____________________________(1) Securities carried at fair value through income have no unrealized gains or losses at the balance sheet date as all changes in value have been recognized in the consolidatedstatements of income. See Note 5 - Fair Value of Financial Instruments for more information.78Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsSecurities with unrealized losses at December 31, 2018, and December 31, 2017, aggregated by investment category and those individual securitiesthat have been in a continuous unrealized loss position for less than 12 months and for 12 months or more were as follows:(Dollars in thousands)Less than 12 Months 12 Months or More TotalDecember 31, 2018Fair Value Unrealized Loss Fair Value UnrealizedLoss Fair Value UnrealizedLossAvailable for sale: State and municipal securities$13,101 $(50) $8,463 $(113) $21,564 $(163)Corporate bonds7,932 (65) — — 7,932 (65)U.S. government and agency securities56,271 (54) — — 56,271 (54)Commercial mortgage-backed securities— — — — — —Residential mortgage-backed securities18,836 (65) 77,471 (2,095) 96,307 (2,160)Residential collateralized mortgage obligations14,711 (79) 120,601 (3,162) 135,312 (3,241)Total$110,851 $(313) $206,535 $(5,370) $317,386 $(5,683)Held to maturity: State and municipal securities$13,921 $(33) $— $— $13,921 $(33) December 31, 2017 Available for sale: State and municipal securities$2,114 $(5) $1,210 $(30) $3,324 $(35)Residential mortgage-backed securities46,018 (198) 20,233 (397) 66,251 (595)Residential collateralized mortgage obligations70,788 (641) 60,622 (1,877) 131,410 (2,518)Total$118,920 $(844) $82,065 $(2,304) $200,985 $(3,148)At December 31, 2018, the Company had 118 individual securities with unrealized losses. The unrealized losses for each of the securities relate tomarket interest rate changes. The Company has considered the current market for the securities in an unrealized loss position, as well as the severity andduration of the impairments, and expects that the value will recover. Management does not intend to sell these investments until the fair value exceedsamortized cost and it is more likely than not that the Company will not be required to sell debt securities before the anticipated recovery of the amortizedcost basis of the security; thus, the impairment is determined not to be other-than-temporary.Proceeds from sales of securities available for sale and gross gains for the years ended December 31, 2018, 2017 and 2016 are shown below. December 31,(Dollars in thousands)2018 2017 2016Proceeds from sales$20,877 $— $7,136Gross realized gains381 — 136Gross realized losses(389) — —Tax (benefit) expense related to securities gains/losses(2) — 4879Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe following table presents the amortized cost and fair value of securities available for sale and held to maturity at December 31, 2018, grouped bycontractual maturity. Mortgage-backed securities and collateralized mortgage obligations, which do not have contractual payments due at a single maturitydate, are shown separately. Actual maturities for mortgage-backed securities and collateralized mortgage obligations will differ from contractual maturities asa result of prepayments made on the underlying mortgages.(Dollars in thousands)Held to Maturity Available for SaleDecember 31, 2018Amortized Cost Fair Value Amortized Cost Fair ValueDue in one year or less$— $— $58,681 $58,654Due after one year through five years13,954 13,921 25,175 25,422Due after five years through ten years— — 81,253 82,144Due after ten years5,215 5,215 6,790 6,847Commercial mortgage-backed securities— — 16,672 16,766Residential mortgage-backed securities— — 188,058 186,315Residential collateralized mortgage obligations— — 202,422 199,496Total$19,169 $19,136 $579,051 $575,644The following table presents carrying amounts of securities pledged as collateral for deposits and repurchase agreements for the period endspresented. December 31,(Dollars in thousands)2018 2017Carrying value of securities pledged to secure public deposits$364,055 $276,319Carrying value of securities pledged to repurchase agreements48,847 36,685Note 4 - LoansLoans consist of the following: December 31,(Dollars in thousands)2018 2017Loans held for sale$52,210 $65,343Loans held for investment: Loans secured by real estate: Commercial real estate$1,228,402 $1,083,275Construction/land/land development429,660 322,404Residential real estate629,714 570,583Total real estate2,287,776 1,976,262Commercial and industrial1,272,566 989,220Mortgage warehouse lines of credit207,871 255,044Consumer20,892 20,505Total loans held for investment(1)3,789,105 3,241,031Less: Allowance for loan losses34,203 37,083Net loans held for investment$3,754,902 $3,203,948____________________________(1) Includes net deferred loan fees of $3.2 million and $1.0 million at December 31, 2018, and December 31, 2017, respectively.Included in total loans held for investment were $18.6 million of commercial real estate loans for which the fair value option was elected as ofDecember 31, 2018. At December 31, 2017, the Company held $21.0 million and $5.6 million of commercial real estate loans and commercial and industrialloans, respectively, at fair value. The Company mitigates the interest rate component of fair value risk on loans at fair value by entering into derivativeinterest rate contracts. See Note 5 - Fair Value of Financial Instruments for more information on loans for which the fair value option has been elected.80Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsCredit quality indicators. As part of the Company's commitment to manage the credit quality of its loan portfolio, management annually updatesand evaluates certain credit quality indicators, which include but are not limited to (i) weighted-average risk rating of the loan portfolio, (ii) net charge-offs,(iii) level of non-performing loans, (iv) level of classified loans, and (v) the general economic conditions in the states in which the Company operates. TheCompany maintains an internal risk rating system where ratings are assigned to individual loans based on assessed risk. Loan risk ratings are the primaryindicator of credit quality for the loan portfolio and are continually evaluated to ensure they are appropriate based on currently available information.The following is a summary description of the Company's internal risk ratings:• Pass (1-6)Loans within this risk rating are further categorized as follows:Minimal risk (1)Well-collateralized by cash equivalent instruments held by the Bank.Moderate risk (2)Borrowers with excellent asset quality and liquidity. Borrowers' capitalization and liquidity exceed industrynorms. 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 operatingperformance. Borrowers in this category generally have a sizable net worth that can be converted into liquidassets within 12 months.Average risk (4)Borrowers with sound credit quality and financial performance, including liquidity. Borrowers are supportedby 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, butpossess one or more attributes that cause the overall risk profile to be higher than the majority of newlyapproved loans.Watch (6)A passing loan with one or more factors that identify a potential weakness in the overall ability of the borrowerto repay the loan. These weaknesses are generally mitigated by other factors that reduce the risk ofdelinquency or loss.• Special Mention (7)This grade is intended to be temporary and includes borrowers whose credit quality have deteriorated and is atrisk of further decline.• Substandard (8)This grade includes "Substandard" loans under regulatory guidelines. Substandard loans exhibit a well-definedweakness that jeopardizes debt repayment in accordance with contractual agreements, even though the loanmay be performing. These obligations are characterized by the distinct possibility that a loss may be incurred ifthese weaknesses are not corrected and repayment may be dependent upon collateral liquidation or secondarysource of repayment.• Doubtful (9)This grade includes "Doubtful" loans under regulatory guidelines. Such loans are placed on nonaccrual statusand repayment may be dependent upon collateral with no readily determinable valuation or valuations that arehighly subjective in nature. Repayment for these loans is considered improbable based on currently existingfacts and circumstances.• Loss (0)This grade includes "Loss" loans under regulatory guidelines. Loss loans are charged-off or written down whenrepayment is not expected.81Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe recorded investment in loans by credit quality indicator at December 31, 2018, and December 31, 2017, excluding loans held for sale, were asfollows:(Dollars in thousands)December 31, 2018Loans secured by real estate:Pass Special Mention Substandard Doubtful Loss TotalCommercial real estate$1,206,194 $3,101 $19,107 $— $— $1,228,402Construction/land/land development426,770 157 2,733 — — 429,660Residential real estate617,996 1,142 10,576 — — 629,714Total real estate2,250,960 4,400 32,416 — — 2,287,776Commercial and industrial1,190,718 34,964 46,884 — — 1,272,566Mortgage warehouse lines of credit207,871 — — — — 207,871Consumer20,712 — 180 — — 20,892Total loans held for investment$3,670,261 $39,364 $79,480 $— $— $3,789,105(Dollars in thousands)December 31, 2017Loans secured by real estate:Pass Special Mention Substandard Doubtful Loss TotalCommercial real estate$1,055,911 $7,798 $19,566 $— $— $1,083,275Construction/land/land development318,488 170 3,746 — — 322,404Residential real estate560,945 778 8,860 — — 570,583Total real estate1,935,344 8,746 32,172 — — 1,976,262Commercial and industrial915,111 15,332 58,777 — — 989,220Mortgage warehouse lines of credit255,044 — — — — 255,044Consumer20,223 — 279 3 — 20,505Total loans held for investment$3,125,722 $24,078 $91,228 $3 $— $3,241,031The following tables present the Company's loan portfolio aging analysis at the dates indicated:(Dollars in thousands)December 31, 2018Loans secured by real estate:30-59 DaysPast Due 60-89 DaysPast Due Loans PastDue 90 Days orMore Total Past Due Current Loans Total LoansReceivable Accruing Loans90 or More DaysPast DueCommercial real estate$458 $1,409 $7,224 $9,091 $1,219,311 $1,228,402 $—Construction/land/land development2,657 — 435 3,092 426,568 429,660 —Residential real estate2,137 527 4,149 6,813 622,901 629,714 —Total real estate5,252 1,936 11,808 18,996 2,268,780 2,287,776 —Commercial and industrial276 8,263 6,157 14,696 1,257,870 1,272,566 —Mortgage warehouse lines of credit— — — — 207,871 207,871 —Consumer383 8 2 393 20,499 20,892 —Total loans held for investment$5,911 $10,207 $17,967 $34,085 $3,755,020 $3,789,105 $—82Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statements(Dollars in thousands)December 31, 2017Loans secured by real estate:30-59 DaysPast Due 60-89 DaysPast Due Loans PastDue 90 Days orMore Total Past Due Current Loans Total LoansReceivable Accruing Loans90 or More DaysPast DueCommercial real estate$8,427 $2,791 $1,150 $12,368 $1,070,907 $1,083,275 $—Construction/land/land development1,488 172 464 2,124 320,280 322,404 —Residential real estate2,630 347 3,910 6,887 563,696 570,583 —Total real estate12,545 3,310 5,524 21,379 1,954,883 1,976,262 —Commercial and industrial1,517 9,922 8,074 19,513 969,707 989,220 —Mortgage warehouse lines of credit— — — — 255,044 255,044 —Consumer178 128 74 380 20,125 20,505 —Total loans held for investment$14,240 $13,360 $13,672 $41,272 $3,199,759 $3,241,031 $—The following tables detail activity in the allowance for loan losses by portfolio segment. Allocation of a portion of the allowance to one category ofloans does not preclude its availability to absorb losses in other categories.(Dollars in thousands)Year Ended December 31, 2018Loans secured by real estate:BeginningBalance Charge-offs Recoveries Provision(Benefit)(1) Ending BalanceCommercial real estate$8,998 $1,300 $226 $1,075 $8,999Construction/land/land development2,950 228 6 603 3,331Residential real estate5,807 407 133 172 5,705Commercial and industrial18,831 5,068 2,206 (353) 15,616Mortgage warehouse lines of credit214 — — 102 316Consumer283 121 92 (18) 236Total$37,083 $7,124 $2,663 $1,581 $34,203____________________________(1) The $1.0 million provision for credit losses on the consolidated statements of income includes a $1.6 million net loan loss provision and a $567,000 release of provision foroff-balance sheet commitments for the year ended December 31, 2018.(Dollars in thousands)Year Ended December 31, 2017Loans secured by real estate:BeginningBalance Charge-offs Recoveries Provision(1) Ending BalanceCommercial real estate$8,718 $463 $93 $650 $8,998Construction/land/land development2,805 3 5 143 2,950Residential real estate5,003 1,446 125 2,125 5,807Commercial and industrial33,590 21,767 1,918 5,090 18,831Mortgage warehouse lines of credit139 — — 75 214Consumer276 198 69 136 283Total$50,531 $23,877 $2,210 $8,219 $37,083____________________________(1) The $8.3 million provision for credit losses on the consolidated statements of income includes a $8.2 million net loan loss provision and an $117,000 provision for off-balancesheet commitments for the year ended December 31, 2017.83Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statements(Dollars in thousands)Year Ended December 31, 2016Loans secured by real estate:BeginningBalance Charge-offs Recoveries Provision(Benefit)(1) Ending BalanceCommercial real estate$7,451 $422 $25 $1,664 $8,718Construction/land/land development3,927 24 7 (1,105) 2,805Residential real estate5,094 505 185 229 5,003Commercial and industrial23,648 24,851 4,199 30,594 33,590Mortgage warehouse lines of credit761 — — (622) 139Consumer349 604 126 405 276Total$41,230 $26,406 $4,542 $31,165 $50,531____________________________(1) The $30.1 million provision for credit losses on the consolidated statements of income includes a $31.2 million loan loss provision offset by a $1.1 million release of provisionfor off-balance sheet commitments for the year ended December 31, 2016.The following tables present the balance of loans receivable by method of impairment evaluation at the dates indicated:(Dollars in thousands)December 31, 2018Loans secured by real estate:Period End AllowanceAllocated to LoansIndividually Evaluatedfor Impairment Period End AllowanceAllocated to LoansCollectively Evaluatedfor Impairment Period End LoanBalance IndividuallyEvaluated forImpairment Period End LoanBalance CollectivelyEvaluated forImpairment (1)Commercial real estate$5 $8,994 $8,773 $1,201,058Construction/land/land development19 3,312 1,017 428,643Residential real estate68 5,637 6,876 622,838Commercial and industrial255 15,361 16,428 1,256,138Mortgage warehouse lines of credit— 316 — 207,871Consumer19 217 184 20,708Total$366 $33,837 $33,278 $3,737,256____________________________(1) Excludes $18.6 million of commercial real estate loans at fair value, which are not evaluated for impairment due to the fair value option election. See Note 5 - Fair Value ofFinancial Instruments for more information.(Dollars in thousands)December 31, 2017Loans secured by real estate:Period End AllowanceAllocated to LoansIndividually Evaluatedfor Impairment Period End AllowanceAllocated to LoansCollectively Evaluatedfor Impairment Period End LoanBalance IndividuallyEvaluated forImpairment Period End LoanBalance CollectivelyEvaluated forImpairment (1)Commercial real estate$312 $8,686 $4,945 $1,057,330Construction/land/land development4 2,946 1,963 320,441Residential real estate72 5,735 7,915 562,668Commercial and industrial4,356 14,475 24,598 959,011Mortgage warehouse lines of credit— 214 — 255,044Consumer63 220 237 20,268Total$4,807 $32,276 $39,658 $3,174,762____________________________(1) Excludes $21.0 million and $5.6 million of commercial real estate loans and commercial and industrial loans, respectively, at fair value, which are not evaluated for impairmentdue to the fair value option election. See Note 5 - Fair Value of Financial Instruments for more information.84Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe following tables present impaired loans at the dates indicated. No mortgage warehouse lines of credit were impaired at either December 31,2018, or December 31, 2017.(Dollars in thousands)December 31, 2018Loans secured by real estate:UnpaidContractualPrincipal Balance RecordedInvestment withno Allowance RecordedInvestment with anAllowance Total RecordedInvestment Allocation ofAllowance for LoanLossesCommercial real estate$10,894 $8,725 $48 $8,773 $5Construction/land/land development1,329 838 179 1,017 19Residential real estate7,815 6,092 784 6,876 68Total real estate20,038 15,655 1,01116,666 92Commercial and industrial18,883 15,806 622 16,428 255Consumer202 — 184 184 19Total impaired loans$39,123 $31,461 $1,817 $33,278 $366(Dollars in thousands)December 31, 2017Loans secured by real estate:UnpaidContractualPrincipal Balance RecordedInvestment withno Allowance RecordedInvestment withan Allowance Total RecordedInvestment Allocation ofAllowance forLoan LossesCommercial real estate$6,047 $1,782 $3,163 $4,945 $312Construction/land/land development2,268 1,813 150 1,963 4Residential real estate10,024 6,750 1,165 7,915 72Total real estate18,339 10,345 4,478 14,823 388Commercial and industrial25,212 6,161 18,437 24,598 4,356Consumer259 141 96 237 63Total impaired loans$43,810 $16,647 $23,011 $39,658 $4,807The average recorded investment and interest income recognized on impaired loans while classified as impaired for the years ended December 31,2018, 2017 and 2016, were as follows: Years Ended December 31,(Dollars in thousands)2018 2017 2016Loans secured by real estate:AverageRecordedInvestment Interest IncomeRecognized AverageRecordedInvestment Interest IncomeRecognized AverageRecordedInvestment Interest IncomeRecognizedCommercial real estate$9,901 $67 $7,046 $165 $7,179 $273Construction/land/land development1,401 16 1,053 10 1,179 55Residential real estate7,529 60 9,398 75 11,065 385Total real estate18,831 143 17,497 250 19,423 713Commercial and industrial14,814 199 40,316 375 94,940 3,139Consumer251 5 244 7 308 18Total impaired loans$33,896 $347 $58,057 $632 $114,671 $3,870All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on nonaccrualloans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned toaccrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Troubled debtrestructurings ("TDRs") are included in certain loan categories within impaired loans. At December 31, 2018, the Company has committed to advance $2,000in connection with impaired loans.85Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNon-performing (nonaccrual) loans held for investment were as follows:(Dollars in thousands)December 31,Loans secured by real estate:2018 2017Commercial real estate$8,281 $1,745Construction/land/land development935 1,097Residential real estate6,668 7,166Total real estate15,884 10,008Commercial and industrial15,792 13,512Consumer180 282Total nonaccrual loans$31,856 $23,802For the years ended December 31, 2018, 2017 and 2016, gross interest income that would have been recorded had the nonaccruing loans beencurrent in accordance with their original terms was $1.4 million, $1.3 million and $1.6 million, respectively. No interest income was recorded on these loanswhile they were considered nonaccrual during the years ended December 31, 2018, 2017 or 2016.The Company elects the fair value option for recording residential mortgage loans held for sale, as well as certain commercial real estate andcommercial and industrial loans, in accordance with U.S. GAAP. The Company had $741,000 of nonaccrual mortgage loans held for sale that were recordedusing the fair value option election at December 31, 2018, and zero at December 31, 2017. There were no nonaccrual loans held for investment that wererecorded using the fair value option election at December 31, 2018, or December 31, 2017.86Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe following is a summary of loans classified as TDRs.(Dollars in thousands)December 31,TDRs2018 2017Nonaccrual TDRs$5,793 $2,622Performing TDRs2,054 14,234Total$7,847 $16,856The following tables present the pre-modification balance of TDR modifications that occurred during the periods indicated and the ending balancesby concession type as of each period presented.(Dollars in thousands)Year Ended December 31, 2018Loans secured by real estate:Number of LoansRestructured Pre-ModificationRecorded Balance Term Concessions Interest RateConcessions Combination Total ModificationsCommercial real estate1 $252 $150 $— $— $150Residential real estate6 428 48 19 331 398Total real estate7 680 198 19 331 548Commercial and industrial3 198 180 — 14 194Consumer1 33 — — 29 29Total11 $911 $378 $19 $374 $771(Dollars in thousands)Year Ended December 31, 2017Loans secured by real estate:Number of LoansRestructured Pre-ModificationRecorded Balance Term Concessions Interest RateConcessions Combination Total ModificationsCommercial real estate4 $2,071 $2,057 $— $— $2,057Residential real estate3 133 38 — 210 248Total real estate7 2,204 2,095 — 210 2,305Commercial and industrial8 10,799 9,882 — 40 9,922Consumer1 49 45 — — 45Total16 $13,052 $12,022 $— $250 $12,272(Dollars in thousands)Year Ended December 31, 2016Loans secured by real estate:Number of LoansRestructured Pre-ModificationRecorded Balance Term Concessions Interest RateConcessions Combination Total ModificationsCommercial real estate2 $398 $94 $— $206 $300Residential real estate6 129 — — 96 96Total real estate8 527 94 — 302 396Commercial and industrial10 19,536 9,331 11 7 9,349Consumer1 22 21 — — 21Total19 $20,085 $9,446 $11 $309 $9,766During the year ended December 31, 2018, no loans defaulted after having been modified as a TDR within the previous 12 months. During the yearended December 31, 2017, one loan with an outstanding principal balance of $241,000 defaulted after having been modified as a TDR within the previous12 months. During the year ended December 31, 2016, four loans with a combined outstanding principal balance of $5.5 million defaulted after having beenmodified as TDRs within the previous 12 months. A payment default is defined as a loan that was 90 or more days past due. The modifications made duringthe year ended December 31, 2018, did not significantly impact the Company's determination of the allowance87Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statementsfor loan losses. The Company monitors the performance of the modified loans to their restructured terms on an ongoing basis. In the event of a subsequentdefault, the allowance for loan losses continues to be reassessed on the basis of an individual evaluation of each loan.Note 5 - Fair Value of Financial InstrumentsFair 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 mostadvantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Certain assets and liabilities arerecorded 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 notavailable, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach to estimatethe 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 threelevels 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 financialinstrument 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, lossseverities, credit risks and default rates;•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 valuedusing the best information available, some of which is internally developed, and reflects the Company's own assumptions about the risk premiums thatmarket participants would generally require and the assumptions they would use.There were no transfers between fair value reporting levels for any period presented.Fair Values of Assets and Liabilities Recorded on a Recurring BasisThe following tables summarize financial assets and financial liabilities recorded at fair value on a recurring basis at December 31, 2018, andDecember 31, 2017, segregated by the level of valuation inputs within the fair value hierarchy88Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statementsutilized to measure fair value. There were no changes in the valuation techniques during 2018 or 2017. December 31, 2018(Dollars in thousands)Level 1 Level 2 Level 3 TotalState and municipal securities$— $61,522 $39,361 $100,883Corporate bonds— 11,034 — 11,034U.S. treasury securities55,515 — — 55,515U.S. government agency securities— 5,635 — 5,635Commercial mortgage-backed securities— 16,766 — 16,766Residential mortgage-backed securities— 186,315 — 186,315Residential collateralized mortgage obligations— 199,496 — 199,496Securities available for sale55,515 480,768 39,361 575,644Securities carried at fair value through income— — 11,361 11,361Loans held for sale— 21,562 — 21,562Loans at fair value— — 18,571 18,571Mortgage servicing rights— — 25,114 25,114Other assets - derivatives— 3,563 — 3,563Total recurring fair value measurements - assets$55,515 $505,893 $94,407 $655,815 Other liabilities - derivatives$— $(2,846) $— $(2,846)Total recurring fair value measurements - liabilities$— $(2,846) $— $(2,846) December 31, 2017(Dollars in thousands)Level 1 Level 2 Level 3 TotalState and municipal securities$— $87,963 $42,015 $129,978Corporate bonds— 3,136 — 3,136Residential mortgage-backed securities— 105,029 — 105,029Residential collateralized mortgage obligations— 166,389 — 166,389Securities available for sale— 362,517 42,015 404,532Securities carried at fair value through income— — 12,033 12,033Loans held for sale— 32,768 — 32,768Loans at fair value— — 26,611 26,611Mortgage servicing rights— — 24,182 24,182Other assets - derivatives— 3,146 — 3,146Total recurring fair value measurements - assets$— $398,431 $104,841 $503,272 Other liabilities - derivatives$— $(3,320) $— $(3,320)Total recurring fair value measurements - liabilities$— $(3,320) $— $(3,320)89Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2018, and 2017, aresummarized as follows:(Dollars in thousands)Loans at Fair Value MSRs Securities Available forSale Securities at Fair ValueThrough IncomeBalance at January 1, 2018$26,611 $24,182 $42,015 $12,033Gain (loss) recognized in earnings: Mortgage banking revenue(1)— (963) — —Other noninterest income(389) — — (258)Gain (loss) recognized in AOCI— — (597) —Purchases, issuances, sales and settlements: Originations— 1,895 — —Purchases— — 259 —Settlements(7,651) — (2,316) (414)Balance at December 31, 2018$18,571 $25,114 $39,361 $11,361 Balance at January 1, 2017$33,693 $29,385 $43,858 $12,511Losses recognized in earnings: Mortgage banking revenue(1)— (6,014) — —Other noninterest income(712) — — (97)Gain recognized in AOCI— — 425 —Purchases, issuances, sales, and settlements: Purchases— 3,061 275 —Sales(2,516) (2,250) — —Settlements(3,854) — (2,543) (381)Balance at December 31, 2017$26,611 $24,182 $42,015 $12,033____________________________(1) Mortgage banking revenue includes changes in fair value due to market changes and run-off.The following methodologies were used to measure the fair value of financial assets and liabilities valued on a recurring basis:Securities Available for SaleSecurities classified as available for sale are reported at fair value utilizing Level 1, Level 2 or Level 3 inputs. For Level 2 securities, the Companyobtains 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 termsand conditions, among other things. In order to ensure the fair values are consistent with Accounting Standards Codification ("ASC") 820, Fair ValueMeasurements and Disclosures, the Company periodically checks the fair value by comparing them to another pricing source, such as Bloomberg LP. Thethird-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 thehierarchy.90Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsMortgage Servicing Rights ("MSR")The carrying amounts of the MSRs equal fair value and are valued using a discounted cash flow valuation technique. The significant assumptionsused to value MSRs were as follows: December 31, 2018 2017Prepayment speed9.90% 10.80%Discount rate10.42 9.33In recent years, there have been significant market-driven fluctuations in the assumptions listed above. These fluctuations can be rapid and maycontinue to be significant. Therefore, estimating these assumptions within ranges that market participants would use in determining the fair value of MSRsrequires significant management judgment.DerivativesFair values for interest rate swap agreements are based upon the amounts that would be required to settle the contracts. Fair values for derivative loancommitments and forward loan sale commitments are based on fair values of the underlying mortgage loans and the probability of such commitments beingexercised. Significant management judgment and estimation is required in determining these fair value measurements.91Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsFair Values of Assets Recorded on a Recurring Basis for which the Fair Value Option has been ElectedCertain 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 themwithout the burden of complying with the requirements for hedge accounting under ASC 815, Derivatives and Hedging. For assets for which the fair valuehas been elected, the earned current contractual interest payment is recognized in interest income, loan origination costs and fees on fair value option loansare recognized in earnings as incurred and not deferred. At December 31, 2018, and December 31, 2017, there were no gains or losses recorded attributable tochanges in instrument-specific credit risk. The following tables summarize the difference between the fair value and the unpaid principal balance for financialinstruments for which the fair value option has been elected: December 31, 2018(Dollars in thousands)Aggregate Fair Value Aggregate UnpaidPrincipal Balance DifferenceLoans held for sale(1)$21,562 $21,173 $389Commercial real estate loans held for investment(2)18,571 18,391 180Securities carried at fair value through income11,361 11,503 (142)Total$51,494 $51,067 $427____________________________(1) A total of $741,000 of loans held for sale were designated as nonaccrual or 90 days or more past due at December 31, 2018. Of this balance, the Company had guaranteesreceivable from U.S. Government agencies totaling $582,000.(2) There were no commercial real estate loans for which the fair value had been elected that were designated as nonaccrual or 90 days or more past due at December 31, 2018. December 31, 2017(Dollars in thousands)Aggregate Fair Value Aggregate UnpaidPrincipal Balance DifferenceLoans held for sale(1)$32,768 $32,216 $552Commercial and industrial loans held for investment(2)5,611 5,591 20Commercial real estate loans held for investment(2)21,000 20,451 549Securities carried at fair value through income12,033 11,918 115Total$71,412 $70,176 $1,236____________________________(1) A total of $2.4 million of loans were 90 days or more past due at December 31, 2017. Of this balance, the Company had guarantees receivable from U.S. governmentagencies totaling $1.8 million.(2) There were no commercial and industrial loans or commercial real estate loans for which the fair value had been elected that were designated as nonaccrual or 90 days or morepast due at December 31, 2017.92Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsChanges in the fair value of assets for which the Company elected the fair value option are classified in the consolidated statement of income lineitems reflected in the following table:(Dollars in thousands)Years Ended December 31,Changes in fair value included in noninterest income:2018 2017 2016Mortgage banking revenue$(163) $477 $(594)Other income: Loans at fair value held for investment(389) (712) (522)Securities carried at fair value through income(258) (97) (140)Total impact on other income(647) (809) (662)Total fair value option impact on noninterest income (1)$(810) $(332) $(1,256)____________________________(1) The fair value option impact on noninterest income is offset by the derivative gain/loss recognized in noninterest income. Please see Note 8 - Mortgage Banking for moredetail.The following methodologies were used to measure the fair value of financial assets valued on a recurring basis for which the fair value option waselected:Securities at Fair Value through IncomeSecurities carried at fair value through income are valued using a discounted cash flow with a credit spread applied to each instrument based on thecredit worthiness of each issuer. Credit spreads ranged from 126 to 227 basis points at both December 31, 2018, and December 31, 2017. The Companybelieves the fair value approximates an exit price.Loans Held for SaleFair values for loans held for sale are established using anticipated sale prices for loans allocated to a sale commitment, and those unallocated to acommitment are valued based on the interest rate and term for similar loans allocated. The Company believes the fair value approximates an exit price.Loans Held for InvestmentFor loans held for investment for which the fair value option has been elected, fair values are calculated using a discounted cash flow model withinputs including observable interest rate curves and unobservable credit adjustment spreads based on credit risk inherent in the loan. Credit spreads rangedfrom 290 to 413 basis points at December 31, 2018, and ranged from 283 to 413 basis points at December 31, 2017. The Company believes the fair valueapproximates an exit price.Fair Value of Assets Recorded on a Nonrecurring BasisEquity Securities without Readily Determinable Fair ValuesEquity securities without readily determinable fair values totaled $42.1 million at December 31, 2018, and are shown on the face of the consolidatedbalance sheets. The majority of the Company's equity investments qualify for the practical expedient allowed for equity securities without a readilydeterminable fair value, such that the Company has elected to carry these securities at cost adjusted for any observable transactions during the period, lessany impairment. To date, no impairment has been recorded on the Company's investments in equity securities that do not have readily determinable fairvalues.Government National Mortgage Association Repurchase AssetThe Company recorded $30.6 million and $32.6 million, respectively, at December 31, 2018, and December 31, 2017, for Government NationalMortgage Association ("GNMA") repurchase assets included in mortgage loans held for sale on the consolidated balance sheets. The assets are valued at thelower of cost or market and, where market is lower than cost, valued using anticipated sale prices for loans allocated to a sale commitment, and thoseunallocated to a commitment are valued based on the interest rate and term for similar loans allocated. The Company believes the fair value approximates anexit price. Please see Note 8 - Mortgage Banking for more information on the GNMA repurchase asset.93Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsCollateral Dependent Impaired LoansLoans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured forimpairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans. If the impaired loan is identified as collateral-dependent, the fair value method of measuring the amount of impairment is utilized. Thismethod requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. Impaired loans that are collateral-dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method. The fair value of impairedloans with specific allocated losses was $1.4 million and $18.2 million at December 31, 2018, and December 31, 2017, respectively. Non-Financial AssetsForeclosed assets held for sale are the only non-financial assets valued on a non-recurring basis that are initially recorded by the Company at fairvalue, 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 recordedinvestment in the related loan, a write-down is recognized through a charge to the allowance for loan losses. Additionally, valuations are periodicallyperformed by management and any subsequent reduction in value is recognized by a charge to income. The carrying value and fair value of foreclosed assetsheld for sale is estimated using Level 3 inputs based on observable market data and was $3.7 million and $499,000 at December 31, 2018, and December 31,2017, respectively. At December 31, 2018, the Company had $2.5 million in residential mortgage loans in the process of foreclosure.Fair Values of Financial Instruments Not Recorded at Fair ValueThe carrying value and estimated fair values of financial instruments not recorded at fair value are as follows:(Dollars in thousands)December 31,Financial assets:2018 2017Level 1 inputs:CarryingValue EstimatedFair Value CarryingValue EstimatedFair ValueCash and cash equivalents$116,678 $116,678 $187,187 $187,187Level 2 inputs: Securities held to maturity19,169 19,136 20,188 20,265Non-marketable equity securities held in other financial institutions42,149 42,149 22,967 22,967Accrued interest and loan fees receivable16,454 16,454 10,719 10,719Level 3 inputs: Loans held for investment, net(1)3,736,331 3,605,142 3,177,337 3,238,872Financial liabilities: Level 2 inputs: Deposits3,783,138 3,537,283 3,512,014 3,352,213FHLB advances and other borrowings445,224 444,286 144,357 145,330Junior subordinated debentures9,644 10,723 9,619 14,132Accrued interest payable2,679 2,679 2,424 2,424____________________________(1) Loans held for investment, net does not include loans for which the fair value option had been elected at December 31, 2018, or December 31, 2017, as these loans are carriedat fair value on a recurring basis.94Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 6 - Premises, Equipment and Lease CommitmentsMajor classifications of premises and equipment are summarized below: December 31,(Dollars in thousands)2018 2017Land, buildings and improvements$82,114 $84,468Furniture, fixtures and equipment24,946 25,349Leasehold improvements11,345 9,673Construction in process1,715 296 120,120 119,786Accumulated depreciation(45,106) (42,378)Total$75,014 $77,408During 2018, one building owned by the Company was sold for a gain of $81,000. In September 2018, the Company closed a banking center in theDallas/Fort Worth area and subsequently transferred the carrying value of $2.8 million from premises and equipment, net to other real estate owned.During 2017, two tracts of land owned by the Company were sold for a net gain of $1.5 million. Net gains or losses on business-use property arereflected on the statement of income in (loss) gain on sales and disposals of other assets, net.The following schedule presents the Company's capital leases: December 31,(Dollars in thousands)2018 2017Gross book value$1,665 $1,665Accumulated amortization (included as a component of accumulated depreciation)(1,204) (963)Net book value$461 $702 Capital lease obligations$508 $758The Company also leases certain real estate for its banking premises, as well as certain equipment, under non-cancelable operating leases that expireat various dates through 2037. Management expects that, in the normal course of business, most leases that expire will be renewed or replaced by othersimilar leases. The Company recognizes escalating lease payments on a straight-line basis over the term of each respective lease with the difference betweencash payment and rent expense recognized being recorded as deferred rent (included in accrued expenses and other liabilities) in the accompanyingconsolidated balance sheets.Depreciation expense for premises and equipment totaled $4.9 million, $5.3 million and $6.4 million for the years ended December 31, 2018, 2017and 2016, respectively.95Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsMinimum future lease obligations for capital and operating leases at December 31, 2018, were as follows:(Dollars in thousands)Year ended December 31,Capital Leases Operating Leases2019$276 $4,3922020253 4,1132021— 3,7752022— 3,5372023— 3,109Thereafter— 10,690Total529 29,616Less amounts representing interest21 —Total lease obligations$508 $29,616Total lease and rental expense for the years ended December 31, 2018, 2017 and 2016 was $4.4 million, $4.2 million and $4.0 million, respectively,and was included in occupancy and equipment, net in the accompanying consolidated statements of income.Note 7 - Goodwill and Other Intangible AssetsDuring 2018, the Company recorded goodwill totaling $4.5 million and other intangible assets totaling $4.9 million in connection with the RCFacquisition.The components of the Company's goodwill and other intangible assets are as follows:(Dollars in thousands)December 31, 2018Weighted Avg.Remaining UsefulLife (Yrs.) Gross AccumulatedAmortization NetGoodwill— $26,741 $— $26,741Other intangible assets: Core deposit intangibles1.8 1,260 (945) 315Relationship based intangibles9.4 7,304 (1,819) 5,485Tradename2.3 186 (46) 140Non-compete1.3 270 (90) 180Total $35,761 $(2,900) $32,861December 31, 2017 Goodwill— $22,192 $— $22,192Other intangible assets: Core deposit intangibles2.8 1,260 (754) 506Relationship based intangibles8.1 3,996 (2,358) 1,638Total $27,448 $(3,112) $24,336There were no changes to the carrying amount of the Company's goodwill during the year ended December 31, 2017. Amortization expense on otherintangible assets totaled $961,000, $518,000 and $1.5 million for the years ended December 31, 2018, 2017 and 2016, respectively, and was included as acomponent of other noninterest expense in the consolidated statements of income.96Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsEstimated future amortization expense for intangible assets remaining at December 31, 2018, was as follows:(Dollars in thousands)Years Ended December 31, 2019$1,32220201,060202184420226892023582Thereafter1,623Total$6,120Note 8 - Mortgage BankingThe following table presents the Company's revenue from mortgage banking operations:(Dollars in thousands)Years Ended December 31,Mortgage banking revenue2018 2017 2016Origination$854 $1,281 $1,312Gain on sale of loans held for sale6,403 11,615 12,546Servicing7,081 7,872 8,146Total gross mortgage revenue14,338 20,768 22,004Mortgage derivatives gain (loss)(725) (205) (24)MSR change due to payoffs and paydowns(3,618) (4,005) (4,425)MSR and hedge fair value adjustment(400) (249) (2,686)Gain (loss) on MSR sale (1)25 (503) —Mortgage banking revenue$9,620 $15,806 $14,869____________________________(1) Amount shown during the year ended December 31, 2018, reflects final settlement on a loan servicing portfolio sold during the year ended December 31, 2017.Management uses mortgage-backed securities to mitigate the impact of changes in fair value of MSRs. See Note 11 - Derivative FinancialInstruments for further information.Mortgage Servicing RightsActivity in MSRs was as follows: Years Ended December 31,(Dollars in thousands)2018 2017 2016Balance at beginning of period$24,182 $29,385 $31,522Origination of servicing rights1,895 3,061 4,230Change in fair value, including amortization, net(963) (6,014) (6,367)Sale of servicing rights— (2,250) —Balance at end of period$25,114 $24,182 $29,385The Company receives annual servicing fee income approximating 0.28% of the outstanding balance of the underlying loans. In connection withthe 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 ofdebtors 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 eitherrepurchase 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 soldwas in violation of representations or warranties made by it 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 obtainedthrough 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 Companyevaluates the claim and takes appropriate actions based on the nature of the claim. The97Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsCompany is required by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation to provide a response to putback claimswithin 60 days of the date of receipt.There were no mortgage loan servicing putback expenses incurred by the Company during 2018 and $106,000 and $83,000 for the years endedDecember 31, 2017 and 2016, respectively. At December 31, 2018, and December 31, 2017, the reserve for mortgage loan servicing putback expenses totaled$196,000 and $254,000, respectively. There is inherent uncertainty in reasonably estimating the requirement for reserves against future mortgage loanservicing putback expenses. Future putback expenses depend on many subjective factors, including the review procedures of the purchasers and the potentialrefinance activity on loans sold with servicing released and the subsequent consequences under the representations and warranties.GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria fromthe securitized loan pool for which the institution provides servicing. At the servicer's option and without GNMA's prior authorization, the servicer mayrepurchase a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. This buy-back option is considered a conditionaloption until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effectivecontrol over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be included in the balance sheet asmortgage loans held for sale, regardless of whether the Company intends to exercise the buy-back option. These loans totaling $30.6 million and $32.6million at December 31, 2018, and December 31, 2017, respectively, were reported as held for sale at lower of cost or market and included in mortgage loansheld for sale and FHLB advances and other borrowings in the consolidated financial statements.Note 9 - DepositsDeposit balances are summarized as follows: December 31,(Dollars in thousands)2018 2017Noninterest-bearing demand$951,015 $832,853Interest bearing demand738,725 738,967Money market815,997 900,039Brokered (1)332,341 276,214Savings148,508 144,848Time deposits (1)796,552 619,093Total Deposits$3,783,138 $3,512,014____________________________(1) Brokered time deposits of $7.9 million are included in the brokered category for December 31, 2018.Municipal deposits totaled $395.0 million and $339.9 million at December 31, 2018 and 2017, respectively.Included in time deposits at December 31, 2018 and 2017, are $364.1 million and $224.8 million, respectively, of time deposits in denominations of$250,000 or more, inclusive of any brokered time deposits.98Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsMaturities of time deposits, including any brokered time deposits at December 31, 2018, are as follows:(Dollars in thousands) Year Ended December 31, 2019$472,7502020235,714202145,388202230,648202319,903Total$804,403At December 31, 2018 and 2017, overdrawn deposits of $841,000 and $640,000, respectively, were reclassified as unsecured loans.Note 10 - BorrowingsBorrowed funds are summarized as follows: December 31,(Dollars in thousands)2018 2017Overnight repurchase agreements with depositors$40,314 $36,178Short-term FHLB advances (1)100,000 —GNMA repurchase liability30,649 32,575Long-term FHLB advances (2)274,261 75,604Total FHLB advances and other borrowings$445,224 $144,357Junior subordinated debentures, net$9,644 $9,619__________________________(1) Short-term FHLB advances carried a fixed interest rate of 2.7% and matured on January 2, 2019.(2) Includes an FHLB advance of $250.0 million at December 31, 2018, which has a final maturity in 2033 that may be callable quarterly at the option of the FHLB beginning inthe third quarter of 2019.Short-Term BorrowingsAs of December 31, 2018, and 2017, the Company had unsecured lines of credit for the purchase of federal funds in the amount of $180.0 millionand $125.0 million respectively, with no amounts outstanding at either date. It is customary for the financial institutions granting the unsecured lines ofcredit 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, andthe Company has complied with all compensating balance requirements to allow utilization of these lines of credit.Securities sold under agreements to repurchase consist of the Company's obligations to other parties and mature on a daily basis. These obligationsto other parties carried a daily average interest rate of 0.86% and 0.29% for the years ended December 31, 2018, and 2017, respectively.Long-Term BorrowingsInterest rates for FHLB long-term advances outstanding at December 31, 2018, ranged from 1.65% to 5.72%, and at December 31, 2017, ranged from1.99% to 5.72%. These advances are all fixed rate and are subject to restrictions or penalties in the event of prepayment.99Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsScheduled maturities of long-term advances from the FHLB at December 31, 2018, are as follows:(Dollars in thousands) Years Ended December 31, 2019$82820201,09920211,14220222,55120234,451Thereafter (1)264,190Total$274,261__________________________(1) Includes an FHLB advance of $250.0 million at December 31, 2018, which has a final maturity in 2033 that may be callable quarterly at the option of the FHLB beginning inthe third quarter of 2019.As of December 31, 2018, the Company held 16 unfunded letters of credit from the FHLB totaling $186.6 million with expiration dates ranging fromFebruary 14, 2019, to November 30, 2020. As of December 31, 2017, the Company held 14 unfunded letters of credit from the FHLB totaling $230.1 millionwith expiration dates ranging from January 11, 2018, to February 15, 2019.Security for all indebtedness and outstanding commitments to the FHLB consists of a blanket floating lien on all of the Company's first mortgageloans, 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 as of December 31, 2018, and 2017, were $468.8 million and $649.0 million, respectively.Additionally, as of December 31, 2018, the Company had the availability to borrow $795.5 million from the discount window at the Federal ReserveBank of Dallas, with $1.05 billion in commercial and industrial loans pledged as collateral. There were no borrowings against this line as of December 31,2018.Holding Company Line of CreditDuring 2018, the Company entered into a Loan Agreement (the "Loan Agreement") with NexBank SSB ("Lender") pursuant to which the Lender willmake one or more revolving credit loans of up to $50 million at any time that the Company may use for working capital and general corporate purposes. Theprincipal amounts borrowed under the Loan Agreement will bear interest at a variable rate equal to the applicable one-month LIBOR rate plus 3.25%. Theline of credit available to the Company under the Loan Agreement expires on October 5, 2021, or such date of the acceleration of the obligation pursuant tothe Loan Agreement, at which time all amounts borrowed, together with applicable interest, fees and other amounts owed by the Company shall be due andpayable. There were no outstanding revolving credit loans under the Loan Agreement as of December 31, 2018.In connection with the entry into the Loan Agreement, the Company issued the Lender a Revolving Promissory Note dated October 5, 2018 (the"Note") in a principal amount of up to $50 million. The Company's obligations under the Loan Agreement and the Note are secured by a pledge of all of theissued and outstanding shares of Origin Bank (such shares, the "Collateral"), pursuant to the Pledge and Security Agreement, dated October 5, 2018 (the"Pledge Agreement").The Loan Agreement, Note and the Pledge Agreement contain customary representations, warranties and covenants, including covenants requiring theCompany and Origin Bank to maintain certain financial and capital ratios. The Loan Agreement, Note and the Pledge Agreement also provide for certainevents of default, the occurrence of which, after any applicable cure period, would permit the Lender, among other things, to accelerate payment of allamounts outstanding under the Loan Agreement and the Note, as applicable, and to exercise its remedies with respect to the Collateral, including the sale ofthe Collateral.Junior Subordinated DebenturesThe Company has two wholly-owned, unconsolidated subsidiary grantor trusts that were established for the purpose of issuing trust preferredsecurities. The trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in each trust agreement. The trusts usedthe net proceeds from each of the offerings to purchase a like amount of junior subordinated debentures (the "debentures") of the Company. The debenturesare the sole assets of the trusts.100Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe Company's obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company ofthe obligations of the trusts. The trust preferred securities are mandatorily redeemable upon maturity of the debentures, or upon earlier redemption asprovided in the respective indentures. The Company has the right to redeem the debentures, in whole or in part on or after specific dates, at a redemptionprice specified in the indentures governing the debentures plus any accrued but unpaid interest to the redemption date. Due to the extended maturity date ofthe trust preferred securities, they are included in Tier I capital for regulatory purposes, subject to certain limitations.The following table is a summary of the terms of the current debentures at December 31, 2018:(Dollars in thousands)Issuance TrustIssuance Date Maturity Date AmountOutstanding Rate Type Current Rate Maximum RateCTB Statutory Trust I07/2001 07/2031 $6,702 Variable (1) 5.83% 12.50%First Louisiana Statutory Trust I09/2006 12/2036 4,124 Variable (2) 4.59 16.00 $10,826 ____________________________(1) The trust preferred securities reprice quarterly based on the three-month LIBOR plus 3.30%, with the last reprice date on October 29, 2018.(2) The trust preferred securities reprice quarterly based on the three-month LIBOR plus 1.80%, with the last reprice date on December 13, 2018.The balance of the debentures outstanding varies from the amounts carried on the consolidated balance sheets due to the remaining purchasediscount of $1.2 million at both December 31, 2018 and 2017, which was established with the acquisition of the issuer of the First Louisiana Statutory Trust Isecurities, and which is being amortized over the remaining life of the securities using the interest method.Note 11 - Derivative Financial InstrumentsRisk Management Objective of Using DerivativesThe Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of theCompany'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 aremarked at fair value through the consolidated statement of income on a recurring basis.Cash Flow Hedges of Interest Rate RiskThe Company is a party to an interest rate swap agreement under which the Company receives interest at a variable rate and pays at a fixed rate. Thederivative instrument represented by this swap agreement is designated as a cash flow hedge of the Company's forecasted variable cash flows under avariable-rate term borrowing agreement. During the term of the swap agreement, the effective portion of changes in the fair value of the derivative instrumentare recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the periods that the hedged forecasted variable-rateinterest payments affected earnings. There was no ineffective portion of the change in fair value of the derivative recognized directly in earnings. The entireswap fair value will be reclassified into earnings before the expiration date of the swap agreement.Derivatives Not Designated as HedgesCustomer interest rate derivative programThe Company offers certain derivatives products, primarily interest rate swaps, directly to qualified commercial banking customers to facilitate theirrisk management strategies. In some instances, the Company acts only as an intermediary, simultaneously entering into offsetting agreements with unrelatedfinancial 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 customerderivatives and any offsetting derivatives are recognized directly in earnings as a component of noninterest income.Mortgage banking derivatives101Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe Company enters into certain derivative agreements as part of its mortgage banking and related risk management activities. These agreementsinclude interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a mandatorydelivery basis. The Company also economically hedges the value of MSRs by entering into a series of commitments to purchase mortgage-backed securitiesin the future.Fair Values of Derivative Instruments on the Balance SheetThe following tables disclose the fair value of derivative instruments in the Company's balance sheets at December 31, 2018, 2017 and 2016, as wellas the effect of these derivative instruments on the Company's consolidated statements of income for the years ended December 31, 2018 and 2017: Notional Amounts(1) Fair Values(Dollars in thousands)December 31, December 31,Derivatives designated as cash flow hedging instruments:2018 2017 2018 2017Interest rate swaps included in other assets$10,500 $10,500 $152 $41 Derivatives not designated as hedging instruments: Interest rate swaps included in other assets$127,512 $132,959 $2,302 $2,314Interest rate swaps included in other liabilities145,857 159,479 (2,625) (3,221)Forward commitments to purchase mortgage-backed securities included inother assets (liabilities)140,000 160,000 709 (50)Forward commitments to sell residential mortgage loans included in otherliabilities24,750 57,400 (221) (49)Interest rate-lock commitments on residential mortgage loans included inother assets16,244 37,072 400 791 $454,363 $546,910 $565 $(215)____________________________(1) Notional or contractual amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordancewith the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in theconsolidated balance sheets.The weighted-average rates paid and received for interest rate swaps at December 31, 2018 and 2017, were as follows: Weighted-Average Interest Rate December 31, 2018 2017Interest rate swaps:Paid Received Paid ReceivedCash flow hedges4.81% 5.36% 4.81% 4.19%Non-hedging interest rate swaps - financial institution counterparties5.02 4.67 4.81 3.45Non-hedging interest rate swaps - customer counterparties4.73 5.05 3.54 4.89Gains and losses recognized on derivative instruments not designated as hedging instruments are as follows:(Dollars in thousands)Years Ended December 31,Derivatives not designated as hedging instruments:2018 2017 2016Amount of loss recognized in mortgage banking revenue (1)$(2,450) $(259) $(2,570)Amount of gain recognized in other non-interest income584 707 842____________________________(1) Gains and losses on these instruments are largely offset by market fluctuations in mortgage servicing rights. See Note 8 - Mortgage Banking for more information oncomponents of mortgage banking revenue.102Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsSome interest rate swaps included in other assets were subject to a master netting arrangement with the counterparty in all years presented and couldbe offset against some amounts included in interest rate swaps included in other liabilities. The Company has chosen not to net these exposures in theconsolidated balance sheets, and any impact of netting these amounts would not be significant.At December 31, 2018, and December 31, 2017, the Company had cash collateral on deposit with swap counterparties totaling $1.9 million and $7.0million, respectively. These amounts are included in interest-bearing deposits in banks in the consolidated balance sheets and are considered restricted cashuntil such time as the underlying swaps are settled.Note 12 - Stock and Incentive Compensation PlansThe Company has granted, and currently has outstanding, stock and incentive compensation awards subject to the provisions of the Company's2012 Stock Incentive Plan ("2012 Plan"). Additionally, awards have been issued prior to the establishment of the 2012 Plan, some of which were stilloutstanding at December 31, 2018. The 2012 Plan is designed to provide flexibility to the Company regarding its ability to motivate, attract and retain theservices of key officers, employees and directors. The 2012 Plan allows the Company to make grants of dividend equivalent rights, incentive stock options,non-qualified stock options, performance unit awards, restricted stock awards, restricted stock units and stock appreciation rights. At December 31, 2018, themaximum number of shares of the Company's common stock available for issuance under the 2012 Plan was 986,348 shares.Share-based compensation cost charged to income for the years ended December 31, 2018, 2017 and 2016 is presented below: Years Ended December 31,(Dollars in thousands)2018 2017 2016Restricted stock$1,462 $1,180 $1,082Stock options(1)— (30) 465Total stock compensation expense$1,462 $1,150 $1,547Related tax benefits recognized in net income$307 $403 $541____________________________(1) Stock option expense for the year ended December 31, 2017, included expense reversal related to 16,638 common stock options forfeited during the period. All remainingstock options became fully vested during the first quarter of 2017, with no further expense incurred after February 2017.Restricted Stock GrantsThe Company's restricted stock grants are time-vested awards and are granted to the Company's Board of Directors, executives and seniormanagement team. The service period in which time-vested awards are earned ranges from one to five years. Time-vested awards are valued utilizing the fairvalue of the Company's stock at the grant date. These awards are recognized on the straight-line method over the requisite service period, with forfeituresrecognized as they occur.103Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe following table summarizes the Company's time-vested award activity: Years Ended December 31, 2018 2017 2016 Shares Weighted AverageGrant-Date FairValue Shares Weighted AverageGrant-Date FairValue Shares Weighted AverageGrant-Date FairValueNonvested shares, January 1,61,293 $24.61 84,019 $24.22 102,012 $24.56Granted151,324 37.51 35,913 25.14 31,477 23.19Vested(36,209) 27.70 (55,003) 24.39 (43,770) 24.19Forfeited(2,001) 37.47 (3,636) 24.12 (5,700) 24.69Nonvested shares, December 31,174,407 $35.01 61,293 $24.61 84,019 $24.22During the year ended December 31, 2018, award recipients surrendered and the Company retired 910 shares to cover taxes owed upon the vestingof restricted stock awards. During the year ended December 31, 2017, award recipients surrendered and the Company retired 11,843 shares to cover taxesowed upon the vesting of restricted stock awards. During the year ended December 31, 2016, award recipients surrendered and the Company retired 6,828shares to cover taxes owed upon the vesting of restricted stock awards.At December 31, 2018, there was $5.3 million of total unrecognized compensation cost related to nonvested restricted shares awarded under the2012 Plan. That cost is expected to be recognized over a weighted average period of 3.3 years.Stock Option GrantsThe Company issues common stock options to select officers and employees through individual agreements and as a result of obligations assumedin association with certain business combinations. As a result, both incentive and nonqualified stock options have been issued and may be issued in thefuture. The exercise price of each option varies by agreement and is based on either the fair value of the stock at the date of the grant in circumstances whereoption grants occurred or based on the previously committed exercise price in the case of options acquired through merger. No outstanding stock option hasa term that exceeds twenty years. Vesting periods range from immediate to ten years from the date of grant or merger. The Company recognizes compensationcost for stock option grants over the required service period based upon the grant date fair-value, which is established using a Black-Scholes valuationmodel. The Black-Scholes valuation model uses assumptions of risk-free interest rate, expected term of stock options, expected stock price volatility andexpected dividends. Forfeitures are recognized as they occur.104Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe table below summarizes the status of the Company's stock options and changes during the years ended December 31, 2018, 2017 and 2016.(Dollars in thousands, except per share amounts)Number of Shares Weighted AverageExercise Price Weighted AverageRemainingContractual Term (in years) Aggregate IntrinsicValue (1)Year Ended December 31, 2016 Outstanding at January 1, 2016531,922 $11.69 6.39 $7,322Exercised(169,000) 12.34 — 1,633Expired(4,284) 12.29 — —Outstanding at December 31, 2016358,638 11.37 7.79 3,844Exercised(22,500) 12.29 — 304Forfeited and expired(16,638) 23.89 — —Outstanding at December 31, 2017319,500 10.65 7.07 4,840Exercised(45,500) 12.29 — —Outstanding at December 31, 2018274,000 $10.38 6.75 $6,493Exercisable at December 31, 2018274,000 $10.38 6.75 $6,493____________________________(1) The intrinsic value for stock options for periods at or prior to December 31, 2017, is calculated based on the difference between the weighted average exercise price of theunderlying awards and the weighted average market price of the Company's common stock calculated over thirty days immediately prior to the last day of the Company's fiscalyear.Note 13 - Employee Retirement PlanDefined Contribution Retirement PlanThe Company maintains the Origin Bancorp, Inc. Employee Retirement Plan ("Retirement Plan") that is a defined contribution benefit plan. During2018, the Company amended and restated its Employee Stock Ownership Plan ("ESOP") as the Retirement Plan, a profit-sharing plan that allowscontributions under section 401(k) of the Internal Revenue Code. The Retirement Plan covers substantially all employees who have been employed 25 daysand meet certain other requirements and employment classification criteria. Under the provisions of the Retirement Plan, the Company may makediscretionary matching contributions on a percentage, not to exceed 6%, of a participant's elective deferrals. Any percentage(s) determined by the Companyshall 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 aparticipant. Eligible compensation includes salaries, wages, overtime and bonuses, and excludes expense reimbursements and fringe benefits. In addition, theCompany may make additional discretionary contributions out of current or accumulated net profit. Matching contributions are invested as directed by theparticipant. The total of the Company's contributions may not exceed limitations set forth in the Retirement Plan document or the maximum deductibleunder 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 expenserelated to the Retirement Plan, including optional contributions, was $1.6 million for the year ended December 31, 2018, and $1.4 million for each of theyears ended December 31, 2017 and 2016. There were no unallocated shares within the ESOP at December 31, 2017.At December 31, 2017, the fair value of shares of common stock held by the Retirement Plan was deducted from permanent stockholders' equity inthe consolidated balance sheets and reflected in a line item below liabilities and above stockholders' equity. This presentation was necessary in order torecognize the put option within the Retirement Plan-owned shares, consistent with SEC guidelines, that was present when the Company was not publiclytraded. The Company used a valuation by an external third party to determine the maximum possible cash obligation related to those securities. Increases ordecreases in the value of the cash obligation were included in a separate line item in the statements of changes in stockholders' equity. The fair value ofallocated shares subject to this repurchase obligation totaled $35.0 million at December 31, 2017. Employees no longer have the right to put the stock backto the Company since the completion of the Company's initial public offering in May of 2018.105Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsOther Benefit PlansThe Company has established deferred compensation plans for some of its key executives for which deferred compensation liabilities are recorded asa component of accrued expenses and other liabilities in the accompanying consolidated balance sheets. The deferred compensation liability was $9.0million and $8.3 million as of December 31, 2018, and December 31, 2017, respectively. The expense recorded for the deferred compensation plan totaled$1.1 million for each of the years ended December 31, 2018, and 2017, and $1.4 million for the year ended December 31, 2016.Note 14 - Income TaxesThe provision for income taxes is as follows:(Dollars in thousands)Years Ended December 31,Federal income taxes:2018 2017 2016Current$4,562 $715 $1,321Deferred5,658 4,644 1,532State income taxes: Current638 167 195Deferred(21) 287 (132)Income tax expense (benefit)$10,837 $5,813 $2,916The Tax Cuts and Jobs Act, enacted on December 22, 2017, reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018.The Company remeasured certain deferred tax assets and liabilities in the period of enactment based on the rates at which they are expected to reverse in thefuture, which is generally 21%. The Company completed its analysis of the remeasurement of the Company's deferred tax asset within the measurementperiod and the amount is not materially different from the provisional amount recorded in 2017.During the first quarter of 2018, the Company adopted the provisions of ASU 2018-02 which resulted in a $282,000 adjustment from accumulatedother comprehensive income to retained earnings.106Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsA reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is below: Years Ended December 31, 2018 2017 2016(Dollars in thousands)Amount % Amount % Amount %Income taxes computed at statutory rate$13,113 21.00 % $7,169 35.00 % $5,518 35.00 %Tax exempt revenue, net of nondeductible interest(907) (1.45) (1,629) (7.95) (1,717) (10.89)Low-income housing tax credits, net of amortization(691) (1.11) (624) (3.05) (936) (5.94)Other tax credits, net of add-backs(1,218) (1.95) (1,002) (4.89) (1,002) (6.36)Bank-owned life insurance income(150) (0.24) (221) (1.08) (248) (1.57)State income taxes, net of federal benefit469 0.75 186 0.91 40 0.26Stock-based compensation(252) (0.40) (80) (0.39) (461) (2.92)Deferred tax asset and income tax receivable true-up— — — — 2,468 15.65Return to provision adjustment(67) (0.11) (241) (1.17) (1,026) (6.51)Deferred tax write-down for enacted tax rate changes231 0.37 1,972 9.63 — —Other309 0.49 283 1.37 280 1.78Total income tax expense$10,837 17.35 % $5,813 28.38 % $2,916 18.50 %Significant components of deferred tax assets and liabilities are as follows:(Dollars in thousands)December 31,Deferred tax assets:2018 2017Credit loss allowances$7,762 $8,535Deferred compensation and share-based compensation2,471 2,286Net operating loss carryforwards1,238 1,241Credit carryforwards— 5,968Other1,068 454Gross deferred tax assets12,539 18,484Valuation allowance(867) (797)Deferred tax assets net of valuation allowance$11,672 $17,687 Deferred tax liabilities: Available for sale securities mark to market$440 $879Basis difference in premises and equipment1,655 2,082Intangible assets218 338Mortgage servicing rights5,426 5,225Other125 137Gross deferred tax liabilities7,864 8,661Net deferred tax asset$3,808 $9,026During 2016, the Company elected certain tax accounting method changes with the Internal Revenue Service for originated mortgage servicingrights, certain securities, deferred rents and tenant improvement allowances for certain leases. The result of these accounting changes generated tax netoperating losses and credit carryforwards for the 2016 tax year. As of December 31, 2018, the Company has utilized all of the net operating losses and taxcredit carryforwards generated in 2016. At December 31, 2018, the Company has $4.0 million in Federal gross net operating loss carryforwards acquired inprevious business combinations expiring between 2023 and 2031, and $9.3 million in state net operating losses. Due to limitations on the amounts of theselosses that can be recognized annually, the Company has determined that it is more likely than not that some of these net operating loss carryforwards willexpire unused, and has established a $867,000 valuation allowance related to these carryforwards.107Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsThe Company files a consolidated income tax return in the U.S. federal jurisdiction and various states. With few exceptions, the Company is nolonger subject to income tax examinations by tax authorities in these taxing jurisdictions for the years before 2015.Note 15 - Accumulated Other Comprehensive IncomeAccumulated other comprehensive income ("AOCI") includes the after-tax change in unrealized gains and losses on AFS securities and cash flowhedging activities.(Dollars in thousands)Unrealized Gains(Losses) on AFSSecurities Unrealized Gains(Losses) on Cash FlowHedges Accumulated OtherComprehensive IncomeBalance at January 1, 2016$5,289 $(105) $5,184Net change(1,784) 63 (1,721)Balance at January 1, 20173,505 (42) 3,463Net change(2,225) 69 (2,156)Balance at January 1, 20181,280 27 1,307Net change(4,157) 88 (4,069)Reclassification of tax effects related to the adoption of ASU 2018-02(1): Current(293) 17 (276)Deferred569 (11) 558Balance at December 31, 2018$(2,601) $121 $(2,480)____________________________(1) During the first quarter of 2018, the Company adopted ASU 2018-02. The ASU was issued by the FASB in February 2018, to address the issue of other comprehensiveincome or loss that became stranded in AOCI as a result of the re-measurement of an entity's deferred income tax assets and liabilities following the reduction of the U.S.federal corporate tax rate from 35% to 21% pursuant to the enactment of the Tax Cuts and Jobs Act in December 2017. The Company also had certain current tax amountsstranded in AOCI that resulted from a tax accounting election to tax net gains and losses on AFS securities and cash flow hedges as current items beginning in 2016. TheCompany reclassifies the taxes from AOCI to earnings as the individual securities and hedges are realized. Due to the change in corporate tax rates, the Company had certainnet gains and losses taxed at the 35% rate reflected in AOCI. As these transactions are realized over time, they will flow through income tax expense at the 21% rate. Ratherthan adjusting income tax expense for the difference as each of these securities and instruments are realized, the Company elected to adjust the difference (stranded tax effect) toretained earnings, consistent with the treatment of the deferred tax adjustment.Note 16 - Capital and Regulatory MattersThe Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by federal and statebanking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulatorsthat, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and theregulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures ofassets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are alsosubject 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"). Starting in January 2016, the implementation of thecapital conservation buffer was effective for the Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reaches 2.5% onJanuary 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for thepurpose 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 makecapital distributions, which includes dividend payments and stock repurchases and to pay discretionary bonuses to executive officers.Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts andratios (set forth in the table below) of total, CET1 and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital(as defined) to average assets (as defined). Management108Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statementsbelieves, at December 31, 2018, and December 31, 2017, that the Company and the Bank met all capital adequacy requirements to which they are subject,including the capital buffer requirement.At December 31, 2018, and December 31, 2017, the Bank'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," the Bank must maintain minimum total risk based,CET1, Tier 1 risk based and Tier 1 leverage ratios as set forth in the table.The actual capital amounts and ratios of the Company and Bank at December 31, 2018, and December 31, 2017, are presented in the followingtable:(Dollars in thousands)December 31, 2018Actual Minimum Capital Required - BaselIII Fully Phased-In To be Well Capitalized Under PromptCorrective Action ProvisionsCommon Equity Tier 1 Capital to Risk-WeightedAssetsAmount Ratio Amount Ratio Amount RatioOrigin Bancorp, Inc.$519,468 11.94% $304,431 7.00% N/A N/AOrigin Bank508,826 11.73 303,621 7.00 $281,934 6.50%Tier 1 Capital to Risk-Weighted Assets Origin Bancorp, Inc.528,786 12.16 369,668 8.50 N/A N/AOrigin Bank508,826 11.73 368,683 8.50 346,996 8.00Total Capital to Risk-Weighted Assets Origin Bancorp, Inc.564,437 12.98 456,647 10.50 N/A N/AOrigin Bank544,477 12.55 455,430 10.50 433,743 10.00Leverage Ratio Origin Bancorp, Inc.528,786 11.21 188,711 4.00 N/A N/AOrigin Bank508,826 10.81 188,229 4.00 235,287 5.00December 31, 2017 Common Equity Tier 1 Capital to Risk-WeightedAssets Origin Bancorp, Inc.$360,069 9.35% $269,570 7.00% N/A N/AOrigin Bank416,175 10.82 269,244 7.00 $250,012 6.50%Tier 1 Capital to Risk-Weighted Assets Origin Bancorp, Inc.433,338 11.25 327,411 8.50 N/A N/AOrigin Bank416,175 10.82 326,940 8.50 307,708 8.00Total Capital to Risk-Weighted Assets Origin Bancorp, Inc.472,437 12.26 404,616 10.50 N/A N/AOrigin Bank455,274 11.84 403,748 10.50 384,522 10.00Leverage Ratio Origin Bancorp, Inc.433,338 10.53 164,611 4.00 N/A N/AOrigin Bank416,175 10.13 164,334 4.00 205,418 5.00In the ordinary course of business, the Company depends on dividends from the Bank to provide funds for the payment of dividends to stockholdersand to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities isrequired if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required ifdividends declared and paid exceed the Bank's year-to-date net income combined with the retained net income for the preceding year. Under the foregoingdividend restrictions and while maintaining its "well capitalized" status, management believes that at December 31, 2018, the Bank could pay aggregatedividends of up to $53.7 million to the Company without prior regulatory approval.109Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 17 - Commitments and ContingenciesCredit Related CommitmentsIn the normal course of business, the Company enters into financial instruments, such as commitments to extend credit and letters of credit, to meetthe 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, nonrevolving loan commitments issued mainly to finance the acquisitionand development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial creditlines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has notviolated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a feeby the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower's credit quality deteriorates. A number ofcommercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do notnecessarily 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 athird party if the customer is unable to perform. The Company issues standby letters of credit primarily to provide credit enhancement to its customers' othercommercial 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 inmaking loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other creditsupport. These off-balance sheet financial instruments are summarized below: December 31,(Dollars in thousands)2018 2017Commitments to extend credit$1,178,735 $1,068,088Standby letters of credit46,860 79,893In addition to the above, the Company guarantees the credit card debt of certain customers to the merchant bank that issues the credit cards. Theseguarantees are in place for as long as the guaranteed credit card is open. At December 31, 2018, and December 31, 2017, these credit card guarantees totaled$772,000 and $1.0 million, respectively. This amount represents the maximum potential amount of future payments under the guarantee for which theCompany would be responsible in the event of customer non-payment.At December 31, 2018, and December 31, 2017, the Company had FHLB letters of credit totaling $172.0 million and $185.0 million, respectively,available to secure public deposits, and for other purposes required or permitted by law.Management establishes an asset-specific allowance for lending-related commitments that are considered impaired and computes a formula-basedallowance for performing consumer and commercial lending-related commitments. These are computed using a methodology similar to that used for thecommercial loan portfolio, modified for expected maturities and probabilities of drawdown. The reserve for lending-related commitments was $1.4 millionand $2.0 million at December 31, 2018, and December 31, 2017, respectively, and is included in other liabilities in the accompanying consolidated balancesheets.Loss ContingenciesFrom time to time the Company is also party to various legal actions arising in the ordinary course of business. At this time, management does notexpect that loss contingencies, if any, arising from any such proceedings, either individually or in the aggregate, would have a material adverse effect on theconsolidated financial position or liquidity of the Company.110Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 18 - Related Party TransactionsLoans to executive officers, directors, and their affiliates at December 31, 2018 and 2017 were as follows:(Dollars in thousands)2018 2017Balance, beginning of year$9,934 $11,754Advances1,775 4,354Principal repayments(1,845) (6,174)Effect of changes in composition of related parties(8,536) —Balance, end of year$1,328 $9,934 Commitments to extend credit$3,420 $12,355None of the above loans were considered non-performing or potential problem loans. These loans were made in the ordinary course of business andon substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unaffiliatedpersons and do not involve more than normal risk of collectability.Deposits from related parties held by the Company at December 31, 2018 and 2017, amounted to $30.3 million and $38.0 million, respectively.Note 19 - Business CombinationsAll acquisitions are accounted for using the acquisition method of accounting. Accordingly, the assets and liabilities of acquired entities wererecorded at their estimated fair values at the acquisition date. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfera liability in an orderly transaction between market willing participants at the measurement date. The Company determines the estimated fair values afterreview and consideration of relevant information, including discounted cash flows, quoted market prices, third party valuations, and estimates made bymanagement. Purchase price allocations on completed acquisitions may be modified through the measurement period which cannot exceed one year from theacquisition date. The excess of the purchase price over the estimated fair value of the net assets for tax-free acquisitions is recorded as goodwill, none ofwhich is deductible for tax purposes. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred. The results ofoperations for the acquisition described below have been included in the Company's consolidated financial statements beginning on the acquisition date.Reeves, Coon & FunderburgOn July 1, 2018, the Company acquired certain assets and assumed certain liabilities of Reeves, Coon & Funderburg, ("RCF"), a Louisiana-basedindependent insurance agency offering commercial, personal, health and life insurance. Total consideration was $9.5 million, which was comprised of 66,824shares of its common stock at a price of $40.50 per share, based upon the closing stock price on the date of the acquisition, and $6.8 million in cash.As the consideration paid for RCF exceeded the provisional value of the tangible net assets acquired, goodwill of $4.5 million and identifiableintangible assets valued at $4.9 million associated primarily with RCF's customer relationships were recorded related to the acquisition. This goodwillresulted from the combination of expected operational synergies and increased market share.111Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 20 - Condensed Parent Company Only Financial StatementsFinancial statements of Origin Bancorp, Inc. (parent company only) are as follows:(Dollars in thousands)December 31,Condensed Balance Sheets2018 2017Assets Cash and cash equivalents$5,882 $10,566Investment in affiliates/subsidiaries543,515 450,598Other assets10,393 5,500Total assets$559,790 $466,664Liabilities and Stockholders' Equity Junior subordinated debentures$9,644 $9,619Accrued expenses and other liabilities367 1,703Total liabilities10,011 11,322Retirement Plan-owned (formerly ESOP) shares— 34,991Stockholders' Equity Preferred stock— 65,258Common stock118,633 97,594Additional paid‑in capital242,041 146,061Retained earnings191,585 145,122Accumulated other comprehensive income(2,480) 1,307Total stockholders' equity549,779 455,342Less: Retirement Plan-owned (formerly ESOP) shares— 34,991Total stockholders' equity549,779 420,351Total liabilities and stockholders' equity$559,790 $466,664(Dollars in thousands)Years Ended December 31,Condensed Statements of Income2018 2017 2016Income: Dividends from subsidiaries$4,500 $8,000 $5,625Other2,052 41 11Total income6,552 8,041 5,636Expenses: Salaries and employee benefits658 433 600Other2,015 1,384 1,617Total expenses2,673 1,817 2,217Income before income taxes and equity in undistributed net income of subsidiaries3,879 6,224 3,419Income tax benefit84 477 1,281Income before equity in undistributed net income of subsidiaries3,963 6,701 4,700Equity in undistributed net income of subsidiaries47,642 7,968 8,150Net income$51,605 $14,669 $12,850112Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial Statements(Dollars in thousands)Years Ended December 31,Condensed Statements of Cash Flows2018 2017 2016Cash flows from operating activities: Net income$51,605 $14,669 $12,850Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes9 11 9Equity in undistributed net income of subsidiaries(47,642) (7,968) (8,150)Amortization of subordinated debentures discount25 23 21Stock compensation356 78 65Other, net(2,543) 5,488 215Net cash provided by operating activities1,810 12,301 5,010Cash flows from investing activities: Capital contributed to subsidiaries(45,794) — (37,808)Net purchases of non-marketable equity securities held in other financial institutions(2,213) (2,065) —Net cash used in investing activities(48,007) (2,065) (37,808)Cash flows from financing activities: Net decrease in short-term borrowings— — (3,600)Dividends paid(5,941) (6,996) (5,764)Taxes paid related to net share settlement of equity awards(23) (410) (739)Cash received on exercise of stock options559 186 737Proceeds from issuance of common stock95,178 — 41,809Payment to repurchase preferred stock(48,260) — 1,998Net cash provided by (used by) financing activities41,513 (7,220) 34,441Net (decrease) increase in cash and cash equivalents(4,684) 3,016 1,643Cash and cash equivalents at beginning of year10,566 7,550 5,907Cash and cash equivalents at end of year$5,882 $10,566 $7,550113Table of ContentsORIGIN BANCORP, INC.Notes to Consolidated Financial StatementsNote 21 - Summary of Quarterly Financial Statements (Unaudited)The following tables present selected unaudited data from the Company's condensed consolidated quarterly statements of income for the quarterlyperiods within the years ended December 31, 2018 and 2017: Quarters Ended - 2018(Dollars in thousands)December 31 September 30 June 30 March 31Total interest income$53,058 $48,842 $44,752 $41,444Total interest expense10,997 9,345 7,582 6,720Net interest income42,061 39,497 37,170 34,724Provision for credit losses1,723 504 311 (1,524)Net interest income after provision for credit losses40,338 38,993 36,859 36,248Non-interest income, exclusive of (loss) gain on sales of securities, net10,596 10,237 10,615 9,800(Loss) gain on sales of securities, net(8) — — —Non-interest expense35,023 34,344 32,012 29,857Income before income taxes15,903 14,886 15,462 16,191Income tax expense2,725 2,568 2,760 2,784Net income13,178 12,318 12,702 13,407Less preferred stock dividends— — 808 1,115Less income allocated to participating stockholders(1)86 54 40 553Net income available to common stockholders(1)$13,092 $12,264 $11,854 $11,739Basic earnings per common share(1)$0.56 $0.52 $0.54 $0.60Diluted earnings per common share0.55 0.52 0.53 0.60____________________________(1) Due to the methodology of how share allocations for preferred stock - Series D are computed under the two-class method, the sum of the quarterly periods may not agree tothe year-to-date total presented in the consolidated statements of income for the year ended December 31, 2018. Quarters Ended - 2017(Dollars in thousands)December 31 September 30 June 30 March 31Total interest income$40,408 $39,614 $37,293 $35,278Total interest expense6,190 5,746 5,376 4,976Net interest income34,218 33,868 31,917 30,302Provision for credit losses242 3,327 1,953 2,814Net interest income after provision for credit losses33,976 30,541 29,964 27,488Non-interest income8,715 5,041 5,306 10,125Non-interest expense31,771 40,443 30,674 27,786Income (loss) before income taxes10,920 (4,861) 4,596 9,827Income tax expense (benefit)5,148 (2,688) 773 2,580Net income (loss)5,772 (2,173) 3,823 7,247Less preferred stock dividends1,116 1,115 1,115 1,115Less income allocated to participating stockholders(1)194 3 103 267Net income (loss) available to common stockholders(1)$4,462 $(3,291) $2,605 $5,865Basic earnings (loss) per common share(1)$0.23 $(0.17) $0.13 $0.30Diluted earnings (loss) per common share(1)0.23 (0.17) 0.13 0.30____________________________(1) Due to the methodology of how share allocations for preferred stock - Series D and losses are allocated under the two-class method, the sum of the quarterly periods may notagree to the year-to-date total presented in the consolidated statements of income for the year ended December 31, 2017.114Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosuresNone.Item 9A. Controls and ProceduresEvaluation of disclosure controls and procedures — As of the end of the period covered by this report, an evaluation was performed by theCompany, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures,management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving thedesired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, theCompany's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) were effective at the end of the period covered by thisreport.Management's annual report on internal control over financial reporting — This annual report does not include a report of management'sassessment regarding internal control over financial reporting or an attestation report of the Company's registered public accounting firm due to a transitionperiod established by rules of the SEC for newly public companies.Changes in internal control over financial reporting — There were no changes in the Company's internal control over financial reporting (as suchterm is defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2018, that have materially affected, or arereasonably likely to materially affect, the Company's internal control over financial reporting.115Item 9B. Other InformationNone.PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2019 Annual Meeting ofStockholders to be filed with the SEC within 120 days of our fiscal year end.Item 11. Executive CompensationThe information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2019 Annual Meeting ofStockholders to be filed with the SEC within 120 days of our fiscal year end.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersWith the exception of the equity compensation plan information provided below, the information required by this Item is incorporated herein byreference to our Proxy Statement (Schedule 14A) for our 2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days of our fiscal yearend.Information regarding stock-based compensation awards outstanding and available for future grants as of December 31, 2018, is presented in thetable below. Additional information regarding stock-based compensation plans is presented in Note 12 - Stock and Incentive Compensation Plans in thenotes to our consolidated financial statements contained in Item 8 of this report. Number of Securities to beIssued upon Exercise ofOutstanding Options(1) Weighted AverageExercise Price Number of SecuritiesRemaining Available forFuture Issuance Under EquityCompensation Plans2012 Stock Incentive Plan— $— 986,348Issued prior to establishment of the 2012 Stock Incentive Plan274,000 10.38 —Total274,000 $10.38 986,348____________________________(1) Includes any compensation plan and individual compensation arrangement of the Company under which equity securities of the Company are authorized for issuance.Certain information regarding securities authorized for issuance under our equity compensation plans is included under the section captioned"Stock-Based Compensation Plans" in Part II, Item 5, elsewhere in this Annual Report on Form 10-K.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2019 Annual Meeting ofStockholders to be filed with the SEC within 120 days of our fiscal year-end.Item 14. Principal Accounting Fees and ServicesThe information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2019 Annual Meeting ofStockholders to be filed with the SEC within 120 days of our fiscal year-end.PART IV116Item 15. Exhibits, Financial Statement Schedules(a) Documents filed as part of this Report:(1) Financial Statements: Reference is made to the information set forth in Part II, Item 8 of this Annual Report on Form 10-K, which information isincorporated herein by reference.See Part II—Item 8. Financial Statements and Supplementary Data.(2) Financial Statement Schedules: All financial statement schedules are omitted because they are either not applicable or not required, or becausethe required information is included in the consolidated financial statements or the notes thereto is included in Part II, Item 8 of this Annual Reporton Form 10-K.(3) Exhibits: See (b) below(b) Exhibits:ExhibitNumber Description 3.1 Restated Articles of Incorporation, dated August 7, 2018 (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q filed August 9, 2018) (File No.001-38487). 3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225)). 4.1 Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 filed April 10, 2018 (File No.333-224225)). 4.2 Registration Rights Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation, Pine Brook Capital Partners, L.P., PineBrook Capital Partners (SSP Offshore) II, L.P., and Pine Brook Capital Partners (Cayman), L.P. (incorporated by reference to Exhibit 4.2 to Amendment No. 1to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225)). 4.3 Registration Rights Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation and Castle Creek Capital Partners IV, LP(incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225)). 4.4 Registration Rights Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation and Banc Fund VII L.P. (incorporated byreference to Exhibit 4.4 to Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225)). 4.5 Registration Rights Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation and Banc Fund VIII L.P. (incorporated byreference to Exhibit 4.5 to Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225)). 10.1 Community Trust Financial Corporation 2012 Stock Incentive Plan, incorporated by reference to Exhibit 10.1 of the Registrant's Registration Statement on FormS-1 filed April 10, 2018 (File No. 333-224225). 10.2 Form of Restricted Stock Award Agreement under the Origin Bancorp, Inc. 2012 Stock Incentive Plan, incorporated by reference to Exhibit 10.1 to theCompany's Form 8-K filed August 28, 2018 (File No. 001-38487). 10.3 Form of Stock Option Award Agreement under the Community Trust Financial Corporation 2012 Stock Incentive Plan, incorporated by reference to Exhibit10.3 of the Registrant's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.4 Community Trust Financial Corporation Employee Stock Ownership Plan and Trust Agreement, dated January 1, 2014, as amended, incorporated by referenceto Exhibit 10.4 of Amendment No. 2 to the Registrant's Registration Statement on Form S-1 filed April 27, 2018 (File No. 333-224225). 10.5 Restated Employment Agreement, dated January 1, 2016, by and between Origin Bancorp, Inc. and Drake Mills, incorporated by reference to Exhibit 10.5 of theRegistrant's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.6 Executive Salary Continuation Agreement, dated June 30, 2004, by and between Community Trust Bank and Drake Mills, incorporated by reference to Exhibit10.10 of Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225). 117ExhibitNumber Description10.7 Executive Deferred Compensation Agreement, dated March 30, 2001, by and between Community Trust Bank and Drake Mills, incorporated by reference toExhibit 10.12 of Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225). 10.8 Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement, dated April 25, 2018, by and among New York Life InsuranceCompany, Origin Bank and Drake Mills, incorporated by reference to Exhibit 10.13 of Amendment No. 2 to the Company's Registration Statement on Form S-1filed April 27, 2018 (File No. 333-224225). 10.9 Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement, dated April 26, 2018, by and among Great-West Life & AnnuityInsurance Company, Origin Bank and Drake Mills, incorporated by reference to Exhibit 10.14 of Amendment No. 2 to the Company's Registration Statement onForm S-1 filed April 27, 2018 (File No. 333-224225). 10.10 Employment Agreement, dated October 1, 2008, by and between Community Trust Bank and M. Lance Hall, incorporated by reference to Exhibit 10.6 of theRegistrant's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.11 Amendment to Employment Agreement, dated July 22, 2014, by and between Community Trust Financial Corporation and M. Lance Hall, incorporated byreference to Exhibit 10.7 of the Registrant's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.12 2018 Amendment to Employment Agreement, dated March 15, 2018, by and between Origin Bank (formerly Community Trust Bank) and M. Lance Hall,incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.13 §409A Amended & Restated Executive Salary Continuation Agreement, dated December 13, 2008, by and between Community Trust Bank and M. Lance Hall,incorporated by reference to Exhibit 10.11 of Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225). 10.14 Life Insurance Endorsement Method Split Dollar Plan Agreement, dated September 4, 2002, by and between Community Trust Bank and M. Lance Hall,incorporated by reference to Exhibit 10.15 of Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225). 10.15 Amendment to the Life Insurance Endorsement Split Dollar Plan Agreement, dated December 8, 2008, by and between Community Trust Bank and M. LanceHall, incorporated by reference to Exhibit 10.16 of Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No. 333-224225). 10.16 Amendment to the Life Insurance Endorsement Method Split Dollar Plan Agreement, dated December 18, 2009, by and between Community Trust Bank and M.Lance Hall, incorporated by reference to Exhibit 10.17 of Amendment No. 1 to the Company's Registration Statement on Form S-1 filed April 19, 2018 (File No.333-224225). 10.17 Change in Control Agreement, dated April 5, 2017, by and between Origin Bank, Origin Bancorp, Inc. and F. Ronnie Myrick, incorporated by reference toExhibit 10.9 of the Registrant's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.18 Supplemental Executive Retirement Plan, dated August 17, 2018, by and between Origin Bank and Stephen H. Brolly, incorporated by reference to Exhibit 10.1to the Company's Form 8-K filed August 21, 2018 (File No. 001-38487). 10.19 Endorsement Split Dollar Life Insurance Agreement, dated August 17, 2018, by and between Origin Bank and Stephen H. Brolly, incorporated by reference toExhibit 10.2 to the Company's Form 8-K filed August 21, 2018 (File No. 001-38487). 10.20 Loan Agreement, dated as of October 5, 2018, by and between Origin Bancorp, Inc. and NexBank SSB, incorporated by reference to Exhibit 10.1 to theCompany's Form 8-K filed October 11, 2018 (File No. 001-38487). 10.21 Revolving Promissory Note issued to NexBank SSB on October 5, 2018, incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed October11, 2018 (File No. 001-38487). 10.22 Pledge and Security Agreement, dated as of October 5, 2018, by and between Origin Bancorp, Inc. and NexBank SSB, incorporated by reference to Exhibit 10.3to the Company's Form 8-K filed October 11, 2018 (File No. 001-38487). 10.23 Securities Purchase Agreement, dated July 6, 2011, by and between the Secretary of the Treasury and Community Trust Financial Corporation, in connectionwith the participation of Community Trust Financial Corporation in the U.S. Treasury's Small Business Lending Fund Program, incorporated by reference toExhibit 10.18 to the Company's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.24 Securities Purchase Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation, Pine Brook Capital Partners, L.P., PineBrook Capital Partners (SSP Offshore) II, L.P., and Pine Brook Capital Partners (Cayman), L.P., incorporated by reference to Exhibit 10.19 to the Company'sRegistration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 118ExhibitNumber Description10.25 Securities Purchase Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation and Castle Creek Capital Partners IV, LP,incorporated by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.26 Securities Purchase Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation and Banc Fund VII L.P, incorporated byreference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 10.27 Securities Purchase Agreement, dated November 9, 2012, by and between Community Trust Financial Corporation and Banc Fund VIII L.P., incorporated byreference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 filed April 10, 2018 (File No. 333-224225). 21 Subsidiaries of the Registrant 23 Consent of Independent Registered Public Accounting Firm 31.1 Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a). 31.2 Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a). 32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 The following financial information from Origin Bancorp, Inc. Annual Report on Form 10-K for the year ended December 31, 2018, is formatted in XBRL: (i)the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Stockholders' Equity andComprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase DocumentSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized. Origin Bancorp, Inc. (Registrant)Date: February 28, 2019By:/s/ Drake Mills Drake Mills Chairman, President and Chief Executive Officer(Principal Executive Officer)119Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrantand in the capacities and on the dates indicated.Signature Date /s/ Drake Mills February 28, 2019Drake Mills, Chairman, President and Chief Executive Officer (Principal Executive Officer) /s/ Stephen H. Brolly February 28, 2019Stephen H. Brolly, Chief Financial Officer/Senior Executive Officer (Principal Financial & Principal Accounting Officer) /s/ John M. Buske February 28, 2019John M. Buske, Director /s/ James S. D'Agostino February 28, 2019James S. D'Agostino, Director /s/ James E. Davison, Jr. February 28, 2019James E. Davison, Jr., Director /s/ Michael A. Jones February 28, 2019Michael A. Jones, Director /s/ Gary E. Luffey February 28, 2019Gary E. Luffey, Director /s/ Farrell J. Malone February 28, 2019Farrell J. Malone, Director /s/ F. Ronnie Myrick February 28, 2019F. Ronnie Myrick, Director /s/ John T. Pietrzak February 28, 2019John T. Pietrzak, Director /s/ George M. Snellings, IV February 28, 2019George M. Snellings, IV, Director /s/ Elizabeth E. Solender February 28, 2019Elizabeth E. Solender, Director /s/ Steven Taylor February 28, 2019Steven Taylor, Director 120Exhibit 21SUBSIDIARIES OF THE REGISTRANTName of SubsidiaryJurisdiction of OrganizationParent EntityOrigin BankLouisianaOrigin Bancorp, Inc.Davison Insurance Agency, LLC (1)LouisianaOrigin Bancorp, Inc.CTB Statutory Trust 1ConneticutOrigin Bancorp, Inc.First Louisiana Statutory Trust IDelawareOrigin Bancorp, Inc.CTB Properties, LLCLouisianaOrigin BankCTB/MNG Condominium Association, Inc.LouisianaOrigin BankCTB/HLP Condominium Association, IncLouisianaOrigin Bank____________________________(1) Davison Insurance Agency, LLC also conducts business as Thomas & Farr Agency, LLC, and Reeves Coon & Funderburg.Exhibit 23Consent of Independent RegisteredPublic Accounting FirmWe consent to the incorporation by reference in the Registration Statement of Origin Bancorp, Inc. (the “Company”) on Form S-8 (No.333-226115) of our report, dated February 28, 2019, on our audits of the consolidated financial statements of the Company as ofDecember 31, 2018, and 2017, and for each of the years in the three-year period ended December 31, 2018, which report is included inthe Company’s Annual Report on Form 10-K for the year ended December 31, 2018./s/ BKD, LLPLittle Rock, ArkansasFebruary 28, 2019Exhibit 31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER I, Drake Mills, certify that:1. I have reviewed this annual report on Form 10-K of Origin Bancorp, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andc)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourthfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: February 28, 2019By:/s/ Drake Mills Drake Mills Chairman, President and Chief Executive OfficerExhibit 31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER I, Stephen H. Brolly, certify that:1. I have reviewed this annual report on Form 10-K of Origin Bancorp, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andc)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourthfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: February 28, 2019By:/s/ Stephen H. Brolly Stephen H. Brolly Executive Vice President and Chief Financial OfficerExhibit 32.1 STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350 In connection with the Annual Report on Form 10-K of Origin Bancorp, Inc. (the “Company”), for the year ended December 31, 2018, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Drake Mills, Chairman, President and Chief Executive Officer of the Company,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company at thedates and for the periods presented in the financial statements included in such Report.Date: February 28, 2019By:/s/ Drake Mills Drake Mills Chairman, President and Chief Executive OfficerExhibit 32.2 STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350 In connection with the Annual Report on Form 10-K of Origin Bancorp, Inc. (the “Company”), for the year ended December 31, 2018, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Stephen H. Brolly, Executive Vice President and Chief Financial Officer, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company at thedates and for the periods presented in the financial statements included in such Report.Date: February 28, 2019By:/s/ Stephen H. Brolly Stephen H. Brolly Executive Vice President and Chief Financial Officer 

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