DEF: Origin Bancorp Announces Board Optimization and Governance Enhancements Ahead of 2025 Annual Meeting

Origin Bancorp, Inc. is reducing its Board of Directors from 16 to 11 members, effective at the upcoming annual meeting, to align with governance best practices and enhance operational efficiency.

Summary

• Origin Bancorp, Inc. is streamlining its Board of Directors, reducing the number of directors from 16 to 11.
• Five directors, Jay Dyer, Farrell Malone, Lori Sirman, Elizabeth Solender, and Steve Taylor, will not stand for reelection.
• The changes are part of a strategic initiative to improve governance and operational efficiency.
• The company emphasized that the departing directors made significant contributions during periods of growth and transformation.
• The remaining board will consist of highly qualified individuals with expertise in banking, financial services, executive leadership, and risk management.
• The Annual Meeting of Stockholders will be held on April 23, 2025, at Squire Creek Country Club in Choudrant, Louisiana.
• Stockholders will vote on the election of 11 directors, a non-binding advisory vote on executive compensation (Say-On-Pay), and the ratification of Forvis Mazars, LLP as the company's independent registered public accounting firm.
• Net interest income for 2024 was $300.4 million, a slight increase from $299.6 million in 2023.
• The company's fully tax equivalent net interest margin (NIM-FTE) remained stable at 3.22% for 2024.
• Book value per common share increased to $36.71 at the end of 2024, up from $34.30 the previous year.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with a focus on strategic improvements and governance, but some financial metrics show a slight decline, leading to a moderately positive sentiment.

Positives

• Board optimization initiative expected to enhance operational efficiency and align with governance best practices.
• Remaining directors possess diverse and relevant expertise.
• Stable net interest income and net interest margin in 2024.
• Increase in book value per common share in 2024.
• Continued commitment to sustainability and ESG principles.
• Strong employee engagement and recognition as a 'Best Bank to Work For' for twelve consecutive years.

Negatives

• Decrease in Return on Average Assets (ROAA) and Return on Average Equity (ROAE) in 2024 compared to 2023.
• Increase in nonperforming loans to total loans held for investment and net charge-offs to average loans held for investment at December 31, 2024.

Risks

• Potential challenges related to maintaining operational efficiency and strategic alignment with a reduced board size.
• Exposure to credit risk, as indicated by the increase in nonperforming loans.
• Compliance risks associated with evolving regulatory requirements.
• Cybersecurity risks inherent in the financial services industry.
• Climate-related risks are being evaluated and incorporated into credit analyses.

Future Outlook

The company is focused on integrating ESG principles into its business strategy and optimizing opportunities for positive impact while advancing long-term goals. The 'Optimize Origin' initiative establishes a clear path to elite level financial performance.

Management Comments

• The recommendation of the Nominating and Corporate Governance Committee reflects the Boards strategic initiative to reduce its size to better align with governance best practices.
• 'Each of these directors have made invaluable contributions to our Company and we are grateful for their service.'
• 'It is a credit to their stewardship that these directors each recognized that right-sizing the Board is in the Companys best interests moving forward.'

Industry Context

The reduction in board size aligns with a broader trend in corporate governance towards smaller, more agile boards, particularly in the financial services industry. This move can improve decision-making efficiency and responsiveness to market changes.

Comparison to Industry Standards

• Origin Bancorp's board size reduction to 11 members brings it closer to the average board size of similar regional banks. For example, according to a 2023 study by Bank Director, the average board size for banks with assets between $5 billion and $10 billion is around 10 members.
• Competitors like Southside Bancshares (11 board members) and Business First Bancshares (10 board members) have similar or smaller board sizes, indicating an industry trend towards leaner boards for enhanced efficiency.
• Origin's ROAA of 0.77% and ROAE of 6.92% are lower than some of its peers. For example, Southside Bancshares reported an ROAA of 1.15% and ROAE of 10.95% for a similar period. Business First Bancshares reported an ROAA of 0.95% and ROAE of 11.17%.

Corporate Governance

Related Party Transactions

• Ordinary banking relationships with officers, directors, and principal stockholders, including deposits, loans, and other financial services.
• Air transportation services provided by Ruston Aviation, Inc., owned by the father of director James Davison, Jr.
• Hospitality and country club services provided by Squire Creek Country Club and Development LLC, jointly owned by the father and brother of director James Davison, Jr.
• Lease agreements between Forth Insurance, LLC and MNG Properties, L.L.C., partially owned by CEO Drake Mills.
• Lease agreements between Forth Insurance, LLC and 2200 Tower Drive, LLC, an entity in which Peyton Farr, the husband of our director Meryl Farr, is a 40% owner.
• Forth Insurance, made an $800,000 investment in Perkins-McKenzie Insurance Agency, LLC (PM Agency), which represents 20% of PM Agencys outstanding membership interests.

Stakeholder Impact

• Shareholders: Potential for improved governance and long-term value creation through board optimization.
• Employees: Continued focus on employee engagement, development, and a positive work environment.
• Customers: Continued provision of personalized relationship banking services.
• Communities: Ongoing commitment to community investment and support through various programs.

Next Steps

• Hold the Annual Meeting of Stockholders on April 23, 2025.
• Elect 11 directors.
• Vote on the Say-On-Pay Proposal.
• Ratify the appointment of Forvis Mazars, LLP as the independent registered public accounting firm.
• Complete second materiality assessment and release Corporate Sustainability Report.

Key Dates