8-K: Origin Bancorp Reports Mixed Q4 Results, Declares Quarterly Dividend

Origin Bancorp announced a decrease in net income for the fourth quarter and full year 2023, while also declaring a quarterly cash dividend of $0.15 per share.

Summary

• Origin Bancorp reported a net income of $13.4 million, or $0.43 diluted earnings per share, for the quarter ended December 31, 2023, a decrease compared to $24.3 million, or $0.79 diluted earnings per share, in the previous quarter.
• Adjusted pre-tax, pre-provision earnings were $26.7 million for the quarter, down from $30.7 million in the linked quarter.
• For the full year 2023, net income was $83.8 million, or $2.71 diluted earnings per share, a decrease from $3.28 per share in 2022.
• Adjusted pre-tax, pre-provision earnings for the year were $125.5 million, down from $138.6 million in 2022.
• Total loans held for investment increased by $92.9 million to $7.66 billion, while total deposits decreased by $123.4 million to $8.25 billion compared to the previous quarter.
• The company sold $78.9 million of available-for-sale investment securities at a loss of $4.6 million to support loan growth.
• A quarterly cash dividend of $0.15 per share was declared, payable on February 29, 2024, to shareholders of record on February 15, 2024.

Sentiment

Score: 4

Explanation: The document presents mixed results with a decrease in profitability and deposits, offset by some positive developments like loan growth and expansion. The overall sentiment is cautiously negative due to the earnings decline and the loss on securities sale.

Positives

• The company's loan portfolio grew by $92.9 million in the fourth quarter.
• The sale of securities is expected to positively impact the net interest margin and diluted EPS in the future.
• The company's book value per common share and tangible book value per common share increased compared to the previous quarter.
• The company declared a quarterly cash dividend of $0.15 per share.
• The allowance for loan credit losses to nonperforming loans increased to 321.66% at December 31, 2023, compared to 301.12% at September 30, 2023.
• The company entered a new Southeast market with two loan production offices.

Negatives

• Net income decreased both for the quarter and the full year compared to the previous periods.
• Adjusted pre-tax, pre-provision earnings decreased for both the quarter and the full year.
• Total deposits decreased by $123.4 million in the fourth quarter.
• The sale of investment securities resulted in a $4.6 million loss.
• Noninterest income decreased by $9.9 million, or 54.8%, from the linked quarter.
• Noninterest expense increased by $2.2 million, or 3.8%, from the linked quarter.
• The effective tax rate increased to 23.5% during the quarter ended December 31, 2023, compared to 19.1% during the linked quarter.

Risks

• The company faces risks related to adverse developments in the banking industry, including impacts on customer confidence and liquidity.
• Economic conditions, including declines in the real estate market and high interest rates, could negatively impact the company's performance.
• Changes in interest rates could affect the company's net interest income.
• Deterioration of asset quality and the performance of the loan portfolio are potential risks.
• The company faces competition from regional and national institutions, as well as fintech companies.
• Operational risks, cybersecurity threats, and fraud could impact the company's business.
• The company's ability to comply with capital and liquidity requirements is a risk factor.

Future Outlook

The company intends to use the proceeds from the sale of securities to support loan growth, including in its new Southeast market, and expects a positive impact on NIM-FTE and diluted EPS.

Management Comments

• Drake Mills, chairman, president and CEO of Origin Bancorp, Inc., stated that the moves made in 2023 and the initiatives prioritized are aimed at long-term profitable growth.
• He expressed confidence in the company's expansion into South Alabama and the Florida Panhandle, along with the strengthening of the balance sheet.

Industry Context

The results reflect the challenges faced by the banking industry due to rising interest rates and economic uncertainty, impacting net interest margins and deposit levels. The expansion into new markets is a strategic move to diversify and grow the business.

Comparison to Industry Standards

• Origin Bancorp's net interest margin of 3.19% is within the range of regional banks, but the decrease in net income and deposits is a concern compared to some peers.
• The company's loan growth of 1.2% is moderate, while some competitors have shown higher growth rates.
• The sale of securities at a loss is a common strategy to improve liquidity, but the impact on earnings is a negative factor.
• The company's capital ratios are within regulatory requirements, but the decrease in deposits and net income may raise concerns among investors.
• Compared to companies like Hancock Whitney Corporation (HWC) and Cadence Bank (CADE), Origin's results show a similar trend of margin compression due to rising interest rates, but Origin's deposit decline is more pronounced.

Stakeholder Impact

• Shareholders will be impacted by the decrease in earnings and the loss on securities sale, but will receive a quarterly dividend.
• Employees may be affected by the company's performance and strategic changes.
• Customers may be impacted by changes in deposit rates and loan offerings.
• Creditors may be impacted by the company's financial performance and capital ratios.

Next Steps

• The company will host an investor conference call and webcast on January 25, 2024, to discuss the results.
• The company will focus on deploying the proceeds from the sale of securities to support loan growth.
• The company will continue its expansion into the Southeast market.

Key Dates

Keywords

earnings, net income, dividends, loans, deposits, financial results, banking, interest rates, credit quality, capital ratios