8-K: Origin Bancorp Reports Mixed Q3 Results, Declares Quarterly Dividend

Origin Bancorp announced a decrease in net income for the third quarter of 2024, alongside a declared quarterly cash dividend of $0.15 per share.

Summary

• Origin Bancorp reported a net income of $18.6 million, or $0.60 diluted earnings per share, for the third quarter of 2024, down from $21.0 million, or $0.67 diluted earnings per share, in the previous quarter.
• Pre-tax, pre-provision earnings were $28.3 million, compared to $32.0 million in the linked quarter.
• Total loans held for investment remained stable at $7.96 billion, with a slight increase of $8.9 million in loans excluding mortgage warehouse lines of credit.
• Noninterest-bearing deposits increased by $27.1 million to $1.89 billion.
• Net interest income rose by $914,000 to $74.8 million.
• Book value per common share increased to $36.76, and tangible book value per common share rose to $31.37.
• Stockholders' equity reached $1.15 billion.
• The company's common equity Tier 1 capital ratio was 12.46%, the Tier 1 leverage ratio was 10.93%, and the total capital ratio was 15.45%.
• The board of directors declared a quarterly cash dividend of $0.15 per share, payable on November 29, 2024.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the decrease in net income and pre-tax, pre-provision earnings, offset by positive trends in deposits and capital ratios. The ongoing investigation into the East Texas market adds a layer of uncertainty.

Positives

• Noninterest-bearing deposits saw a positive increase of 1.5%, reaching $1.89 billion.
• Net interest income experienced a 1.2% increase, reaching $74.8 million.
• The book value per common share increased by 4.3% to $36.76.
• Tangible book value per common share increased by 5.4% to $31.37.
• Stockholders' equity grew by 4.5% to $1.15 billion.
• The company maintains strong capital ratios, with a common equity Tier 1 capital ratio of 12.46%, a Tier 1 leverage ratio of 10.93%, and a total capital ratio of 15.45%.

Negatives

• Net income decreased to $18.6 million, down from $21.0 million in the previous quarter.
• Pre-tax, pre-provision earnings decreased to $28.3 million from $32.0 million in the linked quarter.
• Noninterest income decreased by $6.5 million, or 28.8%, from the linked quarter, primarily due to decreases in the change in fair value of equity investments, mortgage banking revenue and other income.
• Net charge-offs increased significantly to $9.52 million from $2.95 million in the previous quarter.

Risks

• The company's credit metrics were negatively impacted by certain questioned activity involving a single banker, who has since been terminated, in the East Texas market, although the investigation is ongoing and the ultimate loss is not expected to be material.
• There was a decrease in noninterest income primarily due to a decrease in the change in fair value of equity investments, mortgage banking revenue and other income.
• The company is exposed to risks related to changes in interest rates, economic conditions, and the performance of its loan portfolio.
• The company faces competition from regional and national institutions, as well as fintech companies.

Future Outlook

The company is confident that balance sheet trends will continue and that bankers will capitalize on opportunities throughout their markets, but also acknowledges the potential impact of various economic and market factors on future results.

Management Comments

• I am pleased with the balance sheet trends we showed in the third quarter, said Drake Mills, chairman, president and CEO of Origin Bancorp, Inc.
• I am confident these trends will continue and our bankers will capitalize on opportunities throughout our markets.

Industry Context

The results reflect a mixed performance in a challenging economic environment, with increased interest rates impacting both income and expenses. The company's focus on growth in Texas and the Southeast aligns with broader trends of economic migration and development in those regions.

Comparison to Industry Standards

• Origin Bancorp's net interest margin (NIM) of 3.18% is slightly above the average for regional banks, which have been facing pressure on margins due to rising deposit costs.
• The company's capital ratios are strong, exceeding regulatory requirements and indicating a solid financial position compared to peers.
• The increase in non-performing loans and net charge-offs is a concern, but the company's allowance for loan losses is relatively high, suggesting a conservative approach to credit risk management.
• Compared to companies like Hancock Whitney Corporation (HWC) and Cadence Bank (CADE), Origin's loan growth is more modest, but its deposit growth is more robust, indicating a different strategic focus.
• The company's efficiency ratio of 68.86% is higher than some of its more efficient peers, suggesting room for improvement in operational costs.

Stakeholder Impact

• Shareholders will receive a quarterly cash dividend of $0.15 per share.
• Employees may be impacted by the ongoing investigation into the East Texas market.
• Customers may be affected by changes in interest rates and loan terms.
• Creditors are likely to view the company's strong capital ratios positively.

Next Steps

• The company will host an investor conference call and webcast on October 24, 2024, to review its third quarter 2024 financial results.
• The company will continue to work with an outside forensic accounting firm to conclude the analysis of the questioned activity by the end of the year.

Key Dates

Keywords

Origin Bancorp, financial results, net income, earnings per share, dividends, loan portfolio, deposits, capital ratios, credit quality, noninterest income, noninterest expense, book value, tangible book value