Origin Bancorp Inc (OBK) 2023 Q4 法說會逐字稿

Good morning and welcome to the Origin Bancorp, Inc. Fourth Quarter Earnings Conference Call.

My name is David and I will be your EverQ moderator.

Please note that this event is being recorded.

I would now like to turn the conference over to Chris Regan, Director of Investor Relations.

Please go ahead.

Good morning, and thank you for joining us.

Today.

We issued our earnings press release yesterday afternoon, a copy of which is available on our website.

While the slide presentation that we will refer to during this call, please refer to page 2 of our slide presentation, which includes our safe harbor statements regarding forward-looking statements and the use of non-GAAP financial measures for those joining by phone.

Please note the slide presentation is available on our website at w. w. w. dot IR dot origin.com.

Please also note that our safe harbor statements are available on Page 6 of our earnings release filed with the SEC yesterday.

All comments made during today's call are subject to the safe harbor statements in our slide presentation and earnings release.

I'm joined this morning by Origin Bancorp's Chairman, President and CEO, Drake Mills, President and CEO of Origin Bank, Lance Hall, our Chief Financial Officer, Wally Wallace, our Chief Risk Officer, Jim Krapfel, our Chief Accounting Officer, Steve Raleigh, and our Chief Credit and Banking Officer, Preston Moore.

After the presentation, we'll be happy to address any questions you may have.

Direct.

The call is yours.

Thanks, Chris.

And I look back on 2023.

The realization that our people successfully navigated one of the most stressful years in my career provides me with confidence that Origin has attained infrastructure footprint and deposit franchise to be highly successful in the future.

I've often said that we don't manage our Company quarter to quarter, and we've never backed down from capitalizing on the right opportunities and investing for future success this quarter was no exception.

As we are excited about entering our newest markets in South Alabama and the Florida Panhandle next summer will lead this new Southeast market.

He and his team has worked together for more than 15 years building dynamic relationships throughout that region.

South Alabama for Panhandle offer tremendous opportunity for Origin, our culture, our focus on the client experience.

Geographic management model is what has attracted highly talented bankers to Origin.

I believe the combination of this team and our way of doing business will allow us to grow market share and impact communities in a powerful way.

Throughout 2023, we communicated our strategy of staying under 10 billion in assets, and we were successful with that strategy.

Finishing the year at 9.7 billion.

We anticipate crossing this important threshold in 2024.

We have invested in technology processes and people in preparation for the new regulatory environment while there is expense associated with this growth, we are committed to building this company for long-term success by continue to be optimistic about where we are as a company.

The markets we serve in Texas, Louisiana, Mississippi have been resilient and the investments we're making in South Alabama and Florida Panhandle create additional opportunity to add meaningful long-term shareholder value.

Now I'll turn it over to Lance.

Thanks and good morning.

As Drake mentioned, I'm excited about this team of dynamic bankers that will create the new Southeast market with Origin offices planned in mobile Alabama and Fort Walton Beach, Florida.

This new geographic market will partner alongside our existing markets of Houston, North Texas, east, Texas, Louisiana and Mississippi.

Similar to our organic entries into Houston and Dallas and Fort Worth, we have confidence that our Southeast market will be a driver of profitable growth.

I'm personally excited about this opportunity for several reasons.

First, I'll look forward to introducing the origin brand in the way of doing business to Alabama and Florida.

These are dynamic and complementary growth markets and will allow us to further diversify our client base and loan portfolio.

Secondly, I'm honored that such experienced and exceptional bankers would choose to be a part of origin to growth story.

This is a strong example of how our corporate culture is tangible and valuable.

Origin is attractive to bankers because of our culture because of our franchise dynamics because of our entrepreneurial spirit and because of our geographic management model, this Southeast market team is going to be extremely valuable to Origin as we continue to grow.

I firmly believe that our new teammates will be great culture fits great producers and great partners.

Turning to 2023, deposits remain the primary focus of our bankers throughout the year.

And our results from last quarter reflect that focus, excluding brokered deposits, which we intentionally reduced as we managed below $10 billion.

Deposits increased 1.3% compared to the previous quarter.

I'm proud of our team and how they're expanding relationships to provide value to our clients despite the challenging interest rate environment.

Looking forward, I'm confident that we can grow our deposits in the mid-single digit range in 2024, which will allow us to fund loans in the mid-single digits.

As we've said consistently, deposit growth will be a governor to loan growth.

Deposit trends demonstrate continued momentum.

Similar to Q4, loan growth could exceed our mid single digit target, especially given the strength within our Texas footprint.

While we continue to invest in our markets and our people, we also feel strongly that investments in technology is what enhances the client experience and drives market share growth.

We currently have implemented a number of new initiatives and are scheduled for more in 2024.

That will greatly improve the digital and mobile experience for our clients.

We've also implemented measures on the back-end of our business.

They create efficiencies.

I've spoken previously about our continued use of robotics in 2023, we are able to save over 6,500 hours through our process automation platform and reduce have substantial amount of risk to the Company.

I'm very proud of our teams throughout our markets and their unwavering commitment to the vision and strategy of origin.

As we move into 2024, I'm confident that we will continue to leverage our corporate culture and geographic management model to profitably grow our markets and business.

Now I'll turn it over to Jim.

Thanks, Lance.

As reflected on slide 13, I am pleased to report continued solid credit metrics for the quarter.

Past-due loans held for investment came in at 0.34% at year end, up seven basis points from the prior quarter.

End and continue to be well within acceptable levels.

Classified loans held for investment as a percentage of total loans held for investment came in at 1.05% as of year end, up from 0.85% last quarter and matches the level reported as of year end 2022, a current level of total classified loans also continues to be well within acceptable levels.

I am pleased to report this quarter decreases in both nonperforming loans as well as net charge-offs.

Nonperforming loans as a percentage of loans held for investment ended the year at 0.39%, down from 0.42%, while annualized net charge-offs totaled 0.10% for Q4 compared to 0.14% for the prior quarter.

As we have shared in the past, we are relationship-driven with credit underwriting focused on primary secondary and tertiary sources of repayment.

This focus, particularly the focus on secondary and tertiary sources of repayment pay dividends in the fourth quarter as evidenced by 1.9 million in recoveries for the quarter, contributing to the reduction in net charge-offs for the quarter, our allowance for credit losses increased 1.7 million to 96.9 million, resulting in no change from the prior quarter of 1.26% as percentage of total loans held for investments net of mortgage warehouse, our reserve ratio increased slightly from 1.30% as of the prior quarter to 1.31% as of year end.

The stable level of our allowance mirrors our stable credit metrics as to reserve levels.

And as discussed in previous quarters, we continue to balance our sound credit quality with continued economic headwinds.

On Slide 14, we have updated the additional information on our CRE office portfolio, which continues its sound performance as of year end, this segment of our portfolio totaled 375.9 million with an average loan size of only 2.2 million.

The sound credit profile of this segment is evidenced by our weighted average debt service coverage of 1.47 times as well as a weighted average loan to value of 59.4% past due loans totaled 0.32%, while this sector reflected no classifieds, no nonperforming and no charge-offs.

In summary, our portfolio continues its sound performance, driven by our constant focus on relationship banking.

I'll now turn it over to Wallace.

Thanks, Jim, and good morning, everyone.

Turning to the financial highlights in Q4, we reported diluted earnings per share of $0.43. On an adjusted basis, Q4 EPS were $0.6 after excluding a $1.8 million write-down of our MSR and a $4.6 million loss on securities sold during the quarter.

Starting with deposits, total deposits declined 1.5% during the quarter.

However, as Lance mentioned earlier, deposits grew 1.3% linked quarter if you exclude broker deposits, we continue to see a shift of noninterest-bearing deposits into interest-bearing accounts.

So this trend continued to abate and was better than our expectations in Q4.

Moving forward, we still forecast some continued pressure to our non-interest bearing deposit mix over the next couple of quarters.

Ultimately, combined with some continued pricing pressures, our total deposit beta increased slightly to 50% from 47% in Q3, 42% in Q2 and 35% in Q1.

Pricing pressures are easing, but we do expect our beta will increase slightly over the next couple of quarters, absent any change in the rate environment.

Importantly, actions taken to reposition our securities portfolio late in Q3 and again late in Q4 drove a favorable shift in our earning asset mix and combined with loan pricing discipline to more than offset funding cost pressures, resulting in five basis points of net interest margin expansion during the quarter to 3.19%, essentially in line with our expectations.

Moving forward, we anticipate Q. one M. should be relatively flat at plus or minus one basis points, assuming a flat interest rate environment.

We would expect expansion throughout the remainder of 2024 and at an increasing rate in the second half of the year due to elevated volumes of fixed rate loans repricing.

That said, the current Fed dot plot calls for three 25 basis point cuts during 2024.

And the forward curve is pricing and expectation of 5 to six 25 basis point cuts during 2024.

As a reminder, we are asset-sensitive in our modeling.

We assume the first two to four cuts will pressure margin more than subsequent cuts as we assume deposit betas will lag on the way down just as they lagged on the way as such, we assume the first 100 basis points of cuts could result in 15 to 20 basis points of margin pressure in a static environment weighted towards the first two, 25 basis point cuts.

Notably, the previously mentioned fixed rate commercial loan repricing in the second half of 2024 should act as a relief valve to the aforementioned margin pressure.

Should the Fed begin cutting rates in an environment where the Fed is easing, we still expect we can run our business at NIM. above 3% with longer-term full-cycle target over 3.5% as Drake and Lance discussed.

We are very excited about the creation of our new Southeast market.

This strategic investment positions us well from a growth standpoint as we continue our evolution into a midsized bank and was very attractive financially.

We estimate the new Southeast market will achieve breakeven within four quarters and payback in less than 2.5 years, assuming loans were funded with market deposits and cash on hand.

Based on these metrics, we believe the upfront EPS impact is justifiable.

Lastly, as outlined on slide 15 of today's investor presentation, we sold securities with a book value of $78.9 million at a realized loss of 4.6 million during the quarter, we will use the proceeds of this transaction as cash on hand to fund the unfunded loan gap in the new Southeast market as well as for loan growth across our other markets.

You can see on slide 15, a range of earnback margin and EPS benefits for the securities trade, depending on our ability to deploy the proceeds from cash into loans and how long it takes.

But at the midpoint of expectations.

We estimate a payback of 1.5 years, a margin benefit of four basis points and an annual EPS benefit of $0.09.

Shifting to non-interest income, we reported 8.2 million in Q4, excluding the previously mentioned, $1.8 million write-down of our MSR asset and $4.6 million loss on securities sold during the quarter our adjusted noninterest income was 14.6 million in Q4, down from 15.2 million in Q. three, which excluded a $10.1 million gain on an investment write-up and a $7.2 million loss on sale of securities.

Expected seasonality in our insurance business was the primary driver of this decline.

During the quarter, we decided to begin exploring the sale of our mortgage servicing business and recognized an impairment of $1.8 million on the associated MSR to facilitate the planned sale of the assets.

Our noninterest expense increased to 60.9 million in Q4 from 58.7 million in Q3.

The quarter was impacted by 1.5 million in expense, not in our expectations.

These unexpected costs were related in large part to elevated healthcare self-insurance costs and our new Southeast market entry.

While we remain laser focused on managing our operating expense levels, we also believe we can operate from a position of strength and take advantage of opportunities that fit our long-term growth vision like team lift-outs.

As such, we believe expense growth in 2024, including the impact of our new Southeast market, will be in the mid-single digit range compared to 2023.

Turning to capital, we note that our TCE ratio exceeded 9% in Q4, ending at 9.3% as favorable interest rate movement late in the quarter improved the loss position in our securities portfolio, combined with organic growth in tangible common equity.

Furthermore, as shown on slide 23 of our investor presentation, all of our regulatory capital levels at both the bank and holding company remain above levels considered well-capitalized even if we were to include our AOCI. loss in the calculations.

As such, we remain confident that we have the capital flexibility to take advantage of any potential future capital deployment opportunities to drive value for our shareholders.

With that, I'll now turn it back to Drew.

Thanks, Wally.

I'm passionate excited about what we have built as a company and more importantly, where we are going, I think about how we are positioned in the strategic investment we made and will continue to make to grow our balance sheet and create scale.

Our team doesn't think about just being a 10 billion bank, but a 2030 billion and beyond our investment in people is what gives us so much confidence, high quality leaders like Wally Wallace, the CFO, to work alongside Steve rolling the addition of Eric McGee as chief legal counsel and his network throughout Texas and the rest of the industry, the addition of our new compliance officer, branded Greg and new Treasurer, will Lankford, as well as Blair Diamond, our new regulatory liaison.

These additions are to an already impressive team who have worked together for decades as we have proven through investment in people, technology, lift-outs, acquisition and culture.

Our strategic plan is purposeful and focused on building long-term growth and profitability.

The moves we made in 2023 and initiatives that we continue to prioritize are all aimed at long-term profitable growth.

We continue to build an incredibly talented team who operate in what we believe are some of the best, if not the best markets in the United States and we invest in best-of-class technology to provide an unmatched customer experience.

This is a business model built to last and more importantly, one, it is scalable as we look to continue our growth trajectory, origins in a great position, and we are on the offensive now we'll open the call for questions.

Thank you, team.

Ladies and gentlemen, at this time we will conduct the question and answer session.

If you would like to ask a question, please press star one on your telephone keypad.

In order to enter the queue or if you join via web, please press the raise hand icon on the right side of your deal roadshow screen once more, that will be star one on your telephone keypad or the raise hand icon on the right side of your dual roadshow screen.

We'll pause here briefly to allow questions to general.

Our first question comes from Matt <unk> from Stephens Inc. Your line is open.

I think it's can we everybody more or less pretty well, I'd love to hear more about this expansion on the Southeast markets and the team that you hired.

I think you mentioned two LPOs A. lenders right now and support personnel and any more color on just how big of an opportunity this could be and not just over the next year or two, but just longer term, what this looks like.

And then within this team, what types of customers?

Are they going to be focused on?

And specifically, do you expect loan growth to lead deposit growth for this team?

Or will it move in tandem?

Thanks.

Thanks.

Brad, and good morning for us.

We've the last, I guess, couple of years, we've talked about longer-term growth opportunities and we quietly have looked around from the standpoint of some M&A opportunity in that market because obviously, it's come a little bit quicker path that way.

But we fortunately were introduced to this team and they've come out of several different institutions and I really categorize them as on a very successful comp as BB.

18.

If I look at it that way and it just as we continue to be seeing our focus as we continue to stay kind of positioned as to keep our portfolio mix going in the same direction.

These people fit our culture, our plans, our strategies perfectly.

We weren't necessarily ready to do something like this, but it reminds me that in tough times bring opportunities and that's where we have got to take advantage.

And so we hope that this is a springboard to other opportunities in these markets.

But right now, we're going to focus on getting these people up going into profitability, which is going to be key.

I've often said anything we do outside of leveraging our current infrastructure is going to take away from efficiency and we understand the impact to this decision.

But ultimately, when you look at the footprint map.

This is right in line with what our longer-term expectations and strategies were.

So I'm very pleased and I will kind of turn it over to Lance to talk a little bit about of their strategy, their type of customer and how they're focused.

Lance was able to spend what I think is a tremendous amount of time with him creating relationships down the road lanes.

Yes.

Thanks, Reagan.

Hey, thanks, Matt.

Good morning.

I'm incredibly excited about this opportunity.

As we think about the future.

This gives us opportunities to diversify to grow and specifically to do what we like to do, which is focused on C&I and operating companies.

I've had the the honor to get connected to late summer, get to build a relationship with Home maybe in the next regions employ no end of the strength that Compass had in Alabama.

We have a lot of Compass, BBVA employees in Texas that always spoke incredibly highly revealed Compass, BBVA's, South Alabama team.

And so getting to kind of understand and sort of rebuild some of that old team we think is going to be exciting for us I'm going to give you a frame of reference around what we think potential is in the long run.

This team at Compass, BBVA had $1 billion in loans and 1 billion in deposits.

So from a long-term perspective, we're really excited about that opportunity there.

Vast, vast majority Sienna, which fits our profile perfectly.

We like the demographic moves post COVID and work from home.

You've seen tremendous growth in Baldwin County and some of these counties that they represent.

And so as we work to build this out, I think it's going to be a dynamic opportunity for us to scale and create new relationships.

Okay.

Thanks for that, Lance.

Good, great color.

And then on the loan growth side, I think you're pointing us towards that mid-single digit number, but it sounds like that could be partially impacted by the success you have on the deposit growth front.

Just help us appreciate that, that mid-single digit loan growth outlook and how much of that's from the legacy origin side and build a new team coming on?

How much is how much does that influence the mid-single digit loan growth guidance you provided?

Yes.

So for us, right, it's we've been saying this consistently the last three or four quarters loan growth for us is completely governed by deposit growth.

I feel more optimistic today than I have the last couple of quarters because of what we saw in Q4, we shrunk broker deposits purposely in Q4 so that we could make sure that we stayed under 10 b.

But with that, we actually had core deposit growth in Q4.

So I think conservatively, we're kind of thinking, you know, 4% to 7% on the deposit side, which would then therefore align what we're going to do on the loan side.

But if we are able to can that continue the trend from Q4, we know we have loan growth upside because of the dynamic markets in Texas.

And at this point, the vast majority of sort of what we're budgeting and thinking through is sort of our legacy business is the mandate to our Southeast partners is to self-fund.

And so their initial push is going to be to help really grow grow deposits with loans to follow.

Okay.

Appreciate that, Lance.

And then also want to ask Wally, I think I appreciate the guidance you gave around the margin more near term flattish.

It sounds like there's potential for expansion a little bit of expansion beyond that due to that fixed rate loan repricing, I assume that was assuming flat rates because I guess the caveat that you put out was that DES, could there be some some some pressure, so we did that capture the upside scenario, the back half of the year on margin would be a flat rate scenario?

Yes.

Are you there.

Operator,

we can hear you can.

Okay.

Sorry, we had a power surge through a storm is coming through.

So if we could get met only back, I'd appreciate a drink and where do you want to?

(multiple speakers) Yes, we can that I apologize, Matt.

We had so a power surge.

We've got a storm moving through

So understood on the mic.

Yes, to your question about the margin.

We just got the front part of it.

Okay.

No problem.

Well, I was asking about the commentary you made on the prepared remarks about the margin trajectory for the rest of the year kind of flattish more near term.

I got that part of it, but I think you mentioned the back half of the year, the margin could have some upward upward support driven by the fixed rate loan pricing.

I assume that was in a flat rate scenario.

Given your comments about the Fed does cut, you'd be asset-sensitive but there'd be some pressure.

I just want make sure I appreciate that.

The puts and takes around that yet face that your assumption is correct.

So the way we kind of think about what might happen if the Fed cuts.

I said in the prepared remarks, we kind of assume deposit betas will lag.

So if you if you look at the repricing potential we have in the portfolio against the pressures that we would expect from a Fed regime, the changes to be more hawkish, the expansion opportunity that we have in the second half, and we assume and model would offset about four rates.

So if the Fed touch four times, we think our margin could be flattish to where it is right now.

The cadence would be down a little bit if they cut if they started cutting early.

But if they start cutting later in the year that actually we've got so much somebody was repricing in the second half.

We think that that offset the pressures from that, that help that, that.

That's helpful, Wally.

And I'm sure embedded within and some of your assumptions around deposit betas.

And I hear your point as far as that lagging initially from the from the first cut, but maybe beyond that, any preliminary thoughts about deposit betas on the on the way down in this upcoming cycle?

Yes, we think it will lag in our model.

We actually modeled a beta of zero for the first time and then a slightly slightly better beta the second and we kind of went to our historical betas.

The last time we saw Fed cuts and modeled that when we get over 100 and cuts in that environment, we would actually expect to see some margin recovery.

But overall, as you look at one to two basis points of pressure, Tom, and that's after the first hundred when we get kind of to what we would expect would be our cycle betas, if you will?

Yes.

Okay.

Okay.

I'll get back in the queue.

Thanks, guys.

Thank you, Matt.

Thank you, Matt.

Our next question comes from Brady from KBW.

Your line is opened by want to give us

more morning, Brady,

but I know with you guys talking 10 billion this year in the past, we've talked about Durbin being a roughly $5 million pretax number.

Is that a number you all still feel good about?

Yes, with the recent changes that we saw it probably ramps up to about $5.5 million, maybe max six.

And that will start impacting this mid point 25.

All right.

And then I know it's probably embedded in your expense guidance of mid-single-digit growth.

But do you feel like most of the expenses have been already incurred a ticket, you guys ready for this 10 billion cross?

Or are there other expenses that you feel like are upcoming as you guys think about this cross?

Yes.

And obviously, we've spent a lot of time with everything from gap analysis to talking to other institutions that have gone over 10 billion.

And I'll kind of give an analogy.

I'm drive 100 miles an hour.

Rainstorm and wipers are quite keeping up to understand exactly what additional expenses are.

You've got this gut feeling and if nothing is going to tell you that, that 60% to 70% of our expensive Crossing, we somewhat have behind us, but we are ramping up our positions around compliance around audit, especially around risk management.

We understand working with some of our Fed examiners or regulators that some of the expectations are going to be around enterprise risk management is that the pieces and parts, I think we have a little bit to go, but also realize that day one we don't have to have those expenses in place.

I look at this as an opportunity over the next 18, 24 months to to feather those in.

So I would say more than half of the expensive Crossing in my world.

And this isn't anything that I can sit and look at data because there's going to be some unexpected.

Is it going to be some unknowns, but I feel pretty good that we're half halfway plus there.

Okay.

Fine.

And then I'm curious, you guys have a pretty attractive insurance business.

You've been growing it organically even grown it through acquisitions.

There's been a lot of banks recently that have been selling their insurance, just given the valuations and using that gain to go off and do something else?

It feels like you guys are still in building mode, but maybe just updated thoughts on how you think about the insurance business at origin.

Yes.

I'm pretty passionate about the insurance business, the teams we have the ability to expand footprint.

The reason we haven't not been as active as we have in the past is where you're looking at a hard market that's driving increased revenue, but yet we see a on a multiple or have been generated that's higher than than I would like to play.

And so we're waiting for some of that to to relieve itself.

But we see as we build non-interest income opportunities, insurance being a significant part of enhancing and growing that.

We also like and recently because of the sales that have gone out and started to prepare a look at the the the benefits outside of just revenue created and that what I mean by that is the relationships that we have on the bank side because of the age agency book of business.

And we see that continuing to enhance the referral process is very good.

Just kind of hand in glove from growing this footprint in building what I think is recognizable and very valuable noninterest income.

So we could certainly look at it.

We've looked at sales, what it would generate what opportunities that we have with those funds.

At this point, we had a 10% growth in revenue last year.

We saw that type of growth and profitability so even with interest rates where they are, I still see this as a bigger win for investors if we continue this business and stay focused on the next several years, yes, that makes sense.

Thanks for the color, guys.

Thank you, Brian.

Thank you, Brady.

Our next question comes from Graham from Piper Sandler.

Your line is open.

Hey, guys.Can you hear me

again, good morning to everybody that morning.

And I just wanted to start with the Southeast market.

You guys expanded into obviously, I know you said you're focused on profitability, right now and making sure the team is fully integrated.

But as you look at this market longer term, how does how does M&A play into the cards here?

Is this sort of your new area of focus when it comes to building relationships with other banks that that might want to partner up with you down the line?

Or do you think you'll just continue to sort of build out around these teams and just see where it goes from there are you with current conditions?

And I think about when I think about M&A strategy I think about the regulatory front, I think about interest rate marks, I think about AOCI. and the difficulty or the current valuation expectations from these partners and where we currently are we've got to create an opportunity to have a better currency.

We do to get successful.

So we've kind of gone back to the playbook own views and to building out the teams in my in my previous world have had more success, let's say, from from growing through team acquisitions and unnecessarily have an M&A.

And I'm excluding the EBITDA from that.

But as we as we look at what partnerships or what opportunities we have, the majority of that right now is in Texas.

We have had some conversations in the Southeast and we will continue to build those relationships.

But I do think for the next, I'm going to say three to four quarters.

We're going to focus on this team strategy versus ours to see benefit from trait state team strategy that we are going to see from M&A.

Okay.

That's helpful.

And then I guess just just going back to the NIM. and more specifically the deposit beta.

I know you guys are traditionally asset-sensitive names, but obviously I think it's I think it's fair to say that deposit costs may be exceeded where we thought they would go this cycle just given what you guys had done in prior cycles.

So I'm wondering why as you as you look at the NIM. next year and one, the historical deposit betas at around 30%?

And then I guess also two, do you think you might be able to outperform that similar to I guess the incremental pressure it is on the way up, which is closer to 50% now?

Thanks, Graham.

Appreciate the question.

I think that we're trying to take a prudent approach to how we think about deposit betas.

Historically, when you look at what happened in prior cycles, we didn't have Texas and Texas is much more of a C&I market for us.

And a lot of those deposits will be floating or are indexed, but they also come with more non-interest bearing deposits.

So I agree with your statement that the deposit beta was higher than we thought on the way up, but we are not going to assume that it will be higher than we would expect on the way down.

We're taking a much more conservative approach in our own modeling.

And if you heard lesser demand, we're actually modeling a base of zero for the first time or two.

And then our hour, our modeling on the way down would suggest that the deposit and prior cycles, the betas were a little bit lower than they were on later.

Okay.

Thanks.

But then I guess you mentioned it there.

But on indexed deposits, do you guys have like a number of total indexed deposits to the bank?

They would move immediately with any change in rates?

I don't have the dollar amount for you.

But you can look at our public funds and assume that the majority of those are indexed and the majority of what's remaining is.

Okay.

Got I appreciate it, guys.

Thank you.

Thank you, Gary.

Thank you, Graham.

Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad.

Or the raise hand icon on the right side of the deal roadshow screen.

Once more, that will be star one on your telephone keypad or the raise hand icon on your deal roadshow screen.

Our next question comes from Tim from Raymond James.

Your line is open.

Kim, please take out your line is not going to give more detail on what's going on.

good morning tim.

So I wanted to start on kind of on the bond sale and using that those proceeds to fund loan growth in the new South Alabama Panhandle market, kind of how quickly, do you think you can deploy that capital?

And how sensitive would your kind of EPS?

And I outlook that you lined out on the slide, PETER on kind of that timeframe.

So thanks, Tim, and good morning.

We are expect that those proceeds are going to fund loan growth and the new market as well as and our other markets, obviously, Texas markets are fast-growing markets.

We think we can get it deployed.

It doesn't take that long to deploy it because any new loan that's made, we can use those proceeds to fund we don't have to pull any borrowings or pull any on brokered deposits.

So we actually think that it will be weighted more towards the more positive outcome in the scenario outlined on in the slides, and I bought iVillage's second part of your question and now that those data does terrific on that.

And then just kind of wanted to get your general update on credit on this.

Any areas of concern have emerged over February and second quarter you're seeing across your fleet?

Let me I'm going to turn it over to Jim Krause will.

He is doing an awesome job with, I guess, positioned us.

We've had a very aggressive approach to credit, and I'm very pleased where the credit metrics ended 23 and the outlook for 24th of June.

Tim?

Good morning.

And now I feel really good about where we are continuing from a credit perspective.

We're seeing a stability to our credit metrics, one of the things that we did have a slight increase in our level of classifieds.

But when you look a little bit deeper, I was pleased that our actual nonaccrual levels decreased and that drove when we went through our reserve analysis of basically held that flat as a percentage to total loans.

So again, going back to the overall levels of we're just seeing some good stabilization within our account portfolio, not seeing any particular level of concentration or areas of concern within the portfolio.

So Al, in general, though, in here, you know critical the nascent areas of concerns.

But as I've always been concerned, we're not seeing it, but I'm being concerned about office in retail, but still those areas are hold up extremely well for us if that makes sense.

And then just one last one for me.

You guys have talked in the past about kind of taking a more meaningful stake in Argus.

I'm trying to get that timing that directly now and even on actually if you had any updated thoughts on that front?

Yes, more of this, Lance, I yes, just still our strategy origin at a large acquisition in the last half of last year, continuing to grow profitability, grow EBITDA.

We're very bullish on that business.

The partnership that we have for getting to connect that more to our markets is still our intention to increase our investment in them.

We hope the timing of that works out this year.

Thanks for taking my questions, guys.

Thanks, Jim.

Thank you, Tim.

It appears there are currently no further questions and then back to the origin team for any additional remarks.

Thank each one of you for spending time with us this morning, I was recently asked why seem to be as optimistic as I am and my response to me back to think about and consider that during my career we've experienced we've experienced our strongest periods of growth coming out of downturns or industry stress.

We positioned ourselves there and each one of those to have strong credit metrics good liquidity in teams ready to go.

We are in that exact position today and it's hard to sit here and say we're on the offensive.

We realize and recognize we have to be concerned about expenses.

We've got to build revenues and do things that get through this interest rate environment.

But we are only offensive.

We have opportunities that include our geography teams that we have deployed ready to go that have significant experience.

The CNS focus.

Our credit profile coming into this period of time is as good as we can consider to be as excellent.

Our deposit base continues to show that we have opportunities for growth.

And then when you look at current opportunities in our footprint, it just puts together a very optimistic opportunity for us to stay focused and do the things that we know how to do.

We have made several decisions this year that has impacted net earnings or earnings as a whole.

And each one of those was to put us in a better position to be able to deploy capital, put these teams to work and really take advantage of these opportunities.

So as you can tell, I'm passionate, I'm optimistic and it's really nice to be sitting here today on the offensive.

I appreciate your time.

Appreciate your interest in Origin Bank.

And Origin Bancorp, and I thank you for your investment.

Hope to see each one of you soon.

This concludes today's call.

Thank you and have a great day.