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Diluted earnings per share (EPS): $0.60 in the third quarter. Total deposit growth (excluding intermediaries): +2.3% sequentially. Growth in non-interest-bearing deposits: 1.5% increase in the quarter. Net charge-offs: $9.5 million in the quarter, 0.48% of loans. Allowance for loan losses: decreased to $96 million, 1.21% of total loans. Net interest margin (NIM): increased by 1 basis point to 3.18%. Noninterest income: $16 million in the third quarter. Noninterest expenses: decreased to $62.5 million in the third quarter. Tangible Common Equity (TCE) Ratio: Ended the third quarter at 10.0%. Growth in tangible book value per share: 5% quarter over quarter, 17% year over year. Release date: October 24, 2024
For a complete record of financial statements, see Complete Record of Financial Statements.
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Origin Bancorp, Inc. (NYSE:OBK) reported its strongest growth in two years, with total deposits excluding brokered deposits increasing 2.3%. Non-interest bearing deposits increased by 1.5% in the quarter and remained a stable composition at 22% of total deposits. The company has made significant investments in technology and data analytics to strengthen its strategic decision-making and risk management capabilities. Origin Bancorp Inc (NYSE:OBK) successfully reduced historical dues, classified loans, and non-performing loans during the quarter. The company reported that tangible book value per share increased 5% sequentially and 17% year-over-year, demonstrating strong capital management. Negative Points Net interest margin widened by just 1 basis point, lower than the mid-single-digit expansion expected, as deposit costs were higher than expected. Net charge-offs for the quarter increased to $9.5 million from $2.9 million in the prior quarter. The company experienced lower non-interest income primarily due to normal seasonality in its mortgage business. Origin Bancorp (NYSE:OBK) is expected to see near-term net interest margin compression due to delays in asset revaluation following the Fed’s interest rate cuts. The company faces challenges in achieving near-term profitability levels comparable to its peers and plans to address this issue by the end of next year. Q&A Highlights Q: Could you elaborate on the factors that impact your net interest margin, particularly deposit costs and future expectations?
A: Chief Financial Officer William Wallace explained that deposit growth was higher than expected, particularly in interest-bearing accounts, which was weighing on deposit costs. Nevertheless, price trends were still in line with expectations. The company models zero beta in anticipation of a Fed rate cut, but the actual deposit beta was around 40%, better than expected. Margin compression is expected to be about 10 basis points in the fourth quarter, but even without a Fed pause, margins are expected to expand in the future thanks to asset repricing.
Q: What are the specific metrics and goals to achieve peer and top quartile profitability?
A: CEO Drake Mills says the company analyzes expenses and revenues across all lines to achieve profitability in line with peers, with a goal of achieving an ROA of approximately 1.05 to 1.06. I said that there is. The goal is to return to profitability levels at the end of 2022. The company plans to release detailed metrics in January and aims to achieve top-quartile profitability as planned growth returns.
Q: How is the company managing deposit pricing and what relief is expected from potential interest rate cuts?
A: CFO William Wallace said deposit pricing is actively managed in all markets with a focus on profitability and competition. Easing is expected for all deposit products as a result of the rate cut, and no significant price revision benefits are expected. The company plans to use the deposit inflow to reduce brokered deposits, its highest cost segment.
Q: What strategic actions are planned regarding expenses and growth as the company approaches $10 billion in assets?
A: CEO Drake Mills emphasized the impact of technology investments on strategic planning. The company uses data to optimize the profitability of its bankers, products, and branches. Expansion operations in the Southeast are progressing well, and the company is poised for growth in 2025. Origin Bank President and CEO Lance Hall added that the company is focused on maintaining liquidity and a strong balance sheet as the company crosses the $10 billion threshold.
Q: What will it take for the company to get back to the 8% to 10% growth range?
A: Origin Bank President and CEO Lance Hall said the company is focused on driving core liquidity and maintaining high loan-to-deposit ratios. The company is carefully selecting customers and strengthening its balance sheet. Beyond the $10 billion threshold, the company expects significant growth, particularly in Texas and the Southeast.
For a complete record of financial statements, see Complete Record of Financial Statements.
This content was originally published on Gurufocus.com
