Origin Bancorp, Inc.OBK
Origin Bancorp, Inc. Commitments Disclosure
Note 18 — Commitments and Contingencies
Credit-Related Commitments
In the ordinary course of business, the Company enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Company to varying degrees of credit risk and interest rate risk in much the same way as funded loans.
Commitments to extend credit include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the merger and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Company to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Company issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support.
The table below presents the Company’s commitments to extend credit by commitment expiration date for the dates indicated:
(Dollars in thousands) December 31, 2024 | |||||||||||||||||||||||||||||
| Less than One Year | One-Three Years | Three-Five Years | Greater than Five Years | Total | |||||||||||||||||||||||||
Commitments to extend credit(1) | $ | 776,568 | $ | 612,149 | $ | 238,791 | $ | 44,095 | $ | 1,671,603 | |||||||||||||||||||
Standby letters of credit | 169,983 | 42,609 | 21,318 | 350 | 234,260 | ||||||||||||||||||||||||
Total off-balance sheet commitments | $ | 946,551 | $ | 654,758 | $ | 260,109 | $ | 44,445 | $ | 1,905,863 | |||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
Commitments to extend credit(1) | $ | 955,486 | $ | 990,690 | $ | 349,918 | $ | 58,954 | $ | 2,355,048 | |||||||||||||||||||
Standby letters of credit | 103,280 | 20,458 | 32,957 | — | 156,695 | ||||||||||||||||||||||||
Total off-balance sheet commitments | $ | 1,058,766 | $ | 1,011,148 | $ | 382,875 | $ | 58,954 | $ | 2,511,743 | |||||||||||||||||||
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(1)Includes $773.1 million and $759.4 million of unconditionally cancellable commitments at December 31, 2024, and December 31, 2023, respectively.
At December 31, 2024, the Company held 37 unfunded letters of credit from the FHLB totaling $709.2 million, with expiration dates ranging from January 2, 2025, to September 22, 2027. At December 31, 2023, the Company held 31 unfunded letters of credit from the FHLB totaling $693.6 million, with expiration dates ranging from January 14, 2024, to September 22, 2027.
Management establishes an asset-specific allowance for certain lending-related commitments and computes a formula-based allowance for performing consumer and commercial lending-related commitments. These are computed using a methodology similar to that used for the commercial loan portfolio, modified for expected maturities and probabilities of drawdown. The reserve for lending-related commitments was $3.5 million and $4.7 million at December 31, 2024, and December 31, 2023, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets.
Loss Contingencies
During the year ended December 31, 2024, the Company discovered certain questioned activity involving a former banker in our East Texas market. The activity involved the banker, who has since been terminated, facilitating transactions in and among certain customer loans and accounts. The Company has notified its insurance providers of anticipated claims resulting from this activity, but there is no consideration in the Company’s financial results of any potential insurance recoveries.
Several of the loan relationships impacted by the activity were placed on non-accrual and, as a result, the Company recorded a provision for loan credit losses of $4.1 million during the year ended December 31, 2024. Additionally, in conjunction with the on-going investigation of this matter, the Company recorded a net contingency reserve of $4.3 million during the year ended December 31, 2024. Total expenses associated with the questioned activity for the year ended December 31, 2024, were $10.5 million inclusive of the provision for loan credit losses and contingency reserve.
The Company continues to work with a third-party forensic accounting team to confirm the Bank’s identification and reconciliation of the activity, and also to assist in evaluating any additional impact from the questioned activity. There is at least a reasonable possibility that an additional loss may have been incurred in excess of the amount accrued above and that a change in the estimate could occur in the near term. As of the date of this report, management has assessed that an estimate for this additional loss cannot be made. At this time, we believe that any ultimate loss arising from the situation will not be material to our financial position.
From time to time, the Company is also party to various other legal actions arising in the ordinary course of business. Currently, management has not identified any other loss contingencies, either individually or in the aggregate, which would have a material adverse effect on the consolidated financial position or liquidity of the Company.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Feb 27, 2025 | Showing above |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Mar 2, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 28, 2019 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.