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- Diluted Earnings Per Share (EPS): $0.60 for Q3.
- Total Deposits Growth (Excluding Brokered): Up 2.3% quarter over quarter.
- Noninterest-Bearing Deposits Growth: Up 1.5% for the quarter.
- Net Charge-Offs: $9.5 million for the quarter, 0.48% of loans.
- Allowance for Loan Losses: Decreased to $96 million, 1.21% of total loans.
- Net Interest Margin (NIM): Expanded by 1 basis point to 3.18%.
- Noninterest Income: $16.0 million for Q3.
- Noninterest Expense: Declined to $62.5 million in Q3.
- Tangible Common Equity (TCE) Ratio: Ended Q3 at 10.0%.
- Tangible Book Value Per Share Growth: 5% quarter over quarter, 17% year over year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Origin Bancorp Inc (NYSE:OBK) reported a 2.3% increase in total deposits, excluding brokered deposits, marking the strongest growth in two years.
- Noninterest-bearing deposits grew by 1.5% for the quarter, maintaining a stable mix at 22% of total deposits.
- The company has made significant investments in technology and data analysis to enhance strategic decision-making and risk management capabilities.
- Origin Bancorp Inc (NYSE:OBK) has successfully reduced past dues, classified loans, and nonperforming loans during the quarter.
- The company reported a 5% quarter-over-quarter and 17% year-over-year growth in tangible book value per share, indicating strong capital management.
- Net interest margin expanded by only 1 basis point, below the expected mid-single-digit expansion, due to higher-than-anticipated deposit costs.
- Net charge-offs for the quarter increased to $9.5 million from $2.9 million in the prior quarter.
- The company experienced a decrease in noninterest income, primarily due to normal seasonality in the mortgage business.
- Origin Bancorp Inc (NYSE:OBK) anticipates a brief period of net interest margin compression due to the lag in asset repricing benefits following Fed rate cuts.
- The company is facing challenges in achieving near-term profitability levels in line with peers, with plans to address this by the end of next year.
A: William Wallace, CFO, explained that deposit growth was higher than anticipated, particularly in interest-bearing accounts, which added pressure to deposit costs. Despite this, the trends in pricing remained consistent with expectations. The company is modeling a zero beta for Fed rate cuts, but actual deposit betas have been around 40%, which is better than expected. Margin compression of about 10 basis points is expected in Q4, but margin expansion is anticipated in the future, even without a Fed pause, due to asset repricing benefits.
Q: What are the specific metrics and targets for achieving peer and upper quartile profitability?
A: Drake Mills, CEO, stated that the company is analyzing expenses and revenue across all lines to achieve peer-like profitability, targeting an ROA of around 1.05 to 1.06. The goal is to return to profitability levels seen at the end of 2022. The company plans to communicate detailed metrics in January and aims to achieve upper quartile profitability as planned growth returns.
Q: How is the company managing deposit pricing and what relief is expected with potential rate cuts?
A: William Wallace, CFO, noted that deposit pricing is actively managed across all markets, with a focus on profitability and competition. Relief is expected across all deposit products with rate cuts, with no significant lumpy repricing benefits anticipated. The company plans to use deposit inflows to reduce brokered deposits, which are the highest cost segment.
Q: What strategic actions are planned for expenses and growth as the company approaches $10 billion in assets?
A: Drake Mills, CEO, emphasized the impact of technology investments on strategic planning. The company is using data to optimize banker, product, and branch profitability. The Southeast expansion is performing well, and the company is positioning itself for growth in 2025. Lance Hall, President and CEO of Origin Bank, added that the focus is on liquidity and maintaining a strong balance sheet as the company crosses the $10 billion threshold.
Q: What will it take for the company to return to an 8% to 10% growth range?
A: Lance Hall, President and CEO of Origin Bank, stated that the focus is on driving core liquidity and maintaining a strong loan-to-deposit ratio. The company has been selective with clients and is strengthening its balance sheet. Once the $10 billion threshold is crossed, the company expects to grow significantly, particularly in Texas and the Southeast.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.