Earnings Call: Origin Bancorp Reports Growth Despite Profitability Challenges
During the latest third-quarter earnings conference call, Origin Bancorp, Inc. (ticker: OBNK) executives shared insights into the company's financial performance and strategic initiatives. CEO Drake Mills highlighted the company's asset growth from $4.2 billion at its 2018 IPO to nearly $10 billion, while acknowledging the challenges in achieving top-tier profitability. The company is strategically focusing on enhancing profitability by the end of 2024, with a detailed plan expected to be announced in January.
Key Highlights: Origin Bancorp, Inc. has demonstrated significant growth since going public, nearing $10 billion in assets. President Lance Hall reported a 2.3% increase in total deposits and a 1.5% rise in non-interest-bearing deposits. Texas markets showed significant growth with $241 million in deposits and $154 million in loans. The health of the loan portfolio improved, with past-due loans falling to 0.49% and troubled loans to 0.81%. Net charge-offs for the quarter increased to $9.5 million. Diluted earnings per share for Q3 were $0.60, while the net interest margin slightly declined to 3.18%. Non-interest income for Q3 was $16.0 million, showing a decline due to seasonal trends. The tangible equity ratio was 10.0%, with a quarterly increase of 5% in tangible book value per share.
Company Outlook: Management remains optimistic about growth potential and improving financial metrics. The company adjusted its model to anticipate Federal Reserve rate cuts and expects a temporary net interest margin contraction. Non-interest income declined slightly from Q2 due to seasonal trends. Non-interest expenses decreased, with Q4 expenses expected to remain similar to Q2 levels.
Challenges: The company faces profitability pressures and challenges in achieving top-tier profitability. There was an increase in net charge-offs for the quarter.
Opportunities: Management is confident in capital flexibility for future opportunities. There is a commitment to achieving peer-level profitability and an annual growth rate of 8% to 10%. Investments in technology have positively impacted planning and efficiency, especially in the Southeast expansion.
Shortcomings: The net interest margin slightly decreased due to higher-than-expected deposit costs. Non-interest income decreased compared to the previous quarter due to seasonal trends.
Q&A Highlights: Executives addressed credit deterioration concerns by noting improvements in credit metrics. The company is actively working to defer the impact of the Durbin Amendment to 2026. Origin Bancorp is committed to maintaining a strong credit profile as it approaches 2025.
Overall, Origin Bancorp, Inc. is experiencing a period of growth with a strategic focus on enhancing profitability. Despite some challenges, company management is taking active steps to manage expenses, optimize profitability, and maintain a robust credit profile as it approaches a significant asset milestone.
InvestingPro Insights: Origin Bancorp, Inc. (OBNK) continues to demonstrate financial resilience and growth potential, as evidenced by recent earnings discussions and additional data from InvestingPro. The company's price-to-earnings ratio of 11.81 suggests it might be undervalued compared to sector peers, aligning with the management's focus on improving profitability by the end of 2024. InvestingPro data shows OBNK has a price-to-book ratio of 0.88, indicating the stock might be trading below its book value. This could present an opportunity for value investors, especially considering the growth trajectory from $4.2 billion in assets at its IPO to nearly $10 billion now.
An InvestingPro Tip highlights that OBNK has increased its dividend for six consecutive years, appealing to income-focused investors. The current dividend yield is 1.87%, providing a steady income stream alongside potential capital appreciation. Another relevant InvestingPro Tip mentions that analysts predict the company will remain profitable this year, supporting the management's optimistic outlook on growth potential and improving financial metrics. This aligns with the company's Q3 reported diluted earnings per share of $0.60 and the commitment to achieve peer-level profitability.
For investors seeking more in-depth analysis, InvestingPro offers additional tips and insights. Currently, there are five more InvestingPro Tips available for OBNK, which could add further depth to the investment thesis for this growing regional bank.