Origin Bancorp's recent earnings call (Q4 2023 Transcript) showcased a company poised for growth, confidently navigating a challenging economic landscape. While analysts have focused on the bank's strategic maneuvers to stay under the $10 billion asset threshold and their cautious optimism regarding loan growth, a deeper dive into the transcript reveals a potentially overlooked aspect: the expansion into Alabama and Florida. This move, seemingly a calculated step into new markets, might be hiding a far more significant strategic play.

The expansion, spearheaded by a team of seasoned bankers led by Nate Sommer, targets Mobile, Alabama, and Fort Walton Beach, Florida. On the surface, this seems like a logical expansion into contiguous, high-growth markets. Origin's leadership repeatedly emphasizes their commitment to a C&I-focused strategy, and the new team boasts a track record of exactly that, previously managing a $1 billion portfolio in loans and deposits at Compass BBVA.

However, consider this: Origin's leadership is already thinking beyond $10 billion. They're envisioning a $20 billion, $30 billion, and even larger institution. Could Alabama be the key to unlocking this accelerated growth?

Origin's CEO, Drake Mills, alluded to quietly exploring M&A opportunities in the Southeast. While he acknowledged that current market conditions, including AOCI concerns and valuation discrepancies, make traditional mergers challenging, he believes in the power of 'team acquisitions' – a strategy he's found more successful in the past.

Is Origin's Alabama expansion the first step in a strategic roll-up of smaller institutions in the Southeast?

Here's why this hypothesis holds water. First, the chosen locations are not just high-growth areas. Mobile, Alabama, is a significant port city, a gateway to international trade. Fort Walton Beach, Florida, while known for tourism, is also experiencing a surge in defense industry activity due to its proximity to Eglin Air Force Base. These diverse economic drivers create a more resilient market, less susceptible to single-industry downturns.

Second, the emphasis on the new team's ability to 'self-fund' suggests that Origin is not simply looking for loan growth, but for a strong deposit base to fuel larger acquisitions. A billion-dollar deposit portfolio, built on the back of C&I relationships, becomes a powerful asset in an M&A environment where deposit stability is paramount.

Third, Origin is making strategic investments in its personnel infrastructure. They've bolstered their legal, compliance, and risk management teams with individuals possessing deep Texas and national industry connections. This proactive approach suggests preparation for a larger, more complex organization, not just for crossing the $10 billion threshold.

Here's the potential scenario: Origin establishes a strong foothold in Alabama and Florida through organic growth fueled by Sommer's team. This initial success proves the viability of their 'team acquisition' strategy and serves as a springboard for attracting other high-performing teams in the Southeast. Simultaneously, Origin identifies smaller institutions with desirable asset mixes and strong deposit bases in these markets. They leverage their growing deposit base, improved capital position, and newly fortified infrastructure to initiate strategic mergers, absorbing these smaller institutions and rapidly scaling their Southeast presence.

This strategy, if successful, allows Origin to sidestep the valuation challenges of traditional M&A, build a robust deposit franchise, and expand their geographic footprint at an accelerated pace. While analysts are watching Texas, Origin might be quietly laying the foundation for a much grander vision in the Southeast, turning a seemingly modest market entry into a regional powerhouse.

Remember, Origin's history is marked by successful navigation of economic cycles, often emerging from downturns with their strongest growth periods. Their current position – strong credit metrics, good liquidity, and a seasoned, enthusiastic team – mirrors this historical trend. Are they about to repeat history, this time using Alabama as the launchpad for a Southeast banking empire? Only time will tell, but the signs are certainly intriguing.

Loan Growth Potential in Origin Bancorp's New Markets

The chart below compares loan growth potential in Origin Bancorp's existing markets and their new Alabama/Florida venture. This data is based on management comments from the Q4 2023 earnings call transcript and represents internal forecasts. While loan growth is expected to be moderate in existing markets, the emphasis on 'self-funding' in the new market suggests a more deposit-focused approach initially.

"Fun Fact: Origin Bancorp was founded over a century ago, in 1912, as the Bank of Ringgold in Ringgold, Louisiana. This long history of serving local communities provides a strong foundation for their expansion into new markets."