Origin Bancorp Projects Stable Growth After Strong Quarter

Origin Bancorp, Inc. ((OBK)) has held its Q1 earnings call. Read on for the main highlights of the call.

Origin Bancorp’s latest earnings call struck an optimistic tone, as management highlighted solid loan and deposit growth, rising returns on assets, stable credit quality, and a stronger capital return profile. While modest margin compression, investment losses, and rising expenses weighed on results, executives framed these as manageable trade-offs to support scalable growth and long-term profitability.

Robust Loan Growth Led by Texas and the Southeast

Loans held for investment, excluding the mortgage warehouse, grew by $200 million, or 2.8% quarter over quarter, underscoring strong demand across commercial relationships. Management emphasized that most of the momentum came from commercial and industrial activity in Texas and the Southeast, reinforcing the bank’s strategy of leaning into higher-growth regional markets.

Deposit Growth and Healthier Funding Mix

Total deposits rose $234 million, or 2.8%, after adjusting for a temporary year-end deposit sale that was quickly repurchased. Noninterest-bearing deposits grew 4.2% sequentially and finished the quarter at 23.6% of total deposits, supporting funding stability and helping to cushion the impact of higher costs on interest-bearing accounts.

Solid Profitability and Earnings Power

Origin posted diluted EPS of $0.89 for the quarter, supported by pretax pre-provision earnings of $40.2 million, or $40.8 million excluding notable items. The annualized pretax pre-provision return on assets reached 1.61%, and one-time items were modest, trimming earnings by roughly $0.01 per share.

ROA Building Toward Higher Run-Rate Targets

Reported return on assets came in at 1.11% for the first quarter, reflecting early benefits from balance sheet growth and operating leverage. Management said they are building toward a run-rate ROA of at least 1.15% by the fourth quarter, with a pretax pre-provision ROA target above 1.72% as efficiencies and growth initiatives gain traction.

Margin Trends and Net Interest Income Outlook

Net interest margin slipped by 2 basis points to 3.71%, in line with expectations as funding costs remained elevated. Executives guided to roughly a 10-basis-point rebound in the second quarter and expect NIM to finish the year in the 3.7% to 3.8% range, skewed to the high end, supporting mid- to high-single-digit net interest income growth for 2024.

Capital Strength and Enhanced Shareholder Returns

Tangible book value per share increased again to $35.61, marking the 14th straight quarter of growth and underscoring balance sheet resilience. The tangible common equity ratio stood at 11%, and management leaned into that strength by repurchasing 165,500 shares and lifting the quarterly dividend from $0.15 to $0.25.

Credit Metrics Remain Benign

Credit quality remained a bright spot as net charge-offs fell to $2.8 million, or an annualized 0.15%, down from the prior quarter’s level. Past-due loans in the 30 to 89 day bucket were just 0.22%, below the recent four-quarter average, while the allowance for credit losses increased to $99 million and held steady at 1.34% of loans excluding the warehouse portfolio.

Talent Investments and Digital Strategy

To support future growth, Origin has added 15 bankers to its production teams since the start of the year, bolstering origination capacity in key markets. The bank also hired a Chief Technology & Innovation Officer to lead digital, data, and AI initiatives aimed at improving productivity, speeding decisions, and enabling more scalable revenue generation.

Rate Sensitivity and Modest NIM Compression

Management acknowledged the 2-basis-point margin compression to 3.71% but framed it as manageable in the context of the current rate environment. Their outlook assumes two 25-basis-point Federal Reserve cuts later this year, and while NIM and net interest income are sensitive to the timing of those moves, the team said the downside appears limited if rate cuts are delayed or do not materialize.

Noninterest Income Dragged by Investment Losses

Noninterest income totaled $16.8 million, or $16.4 million excluding notable items, only slightly ahead of the prior quarter’s level. Results included $3.3 million in net losses on limited partnership investments, which pulled fee income toward the lower end of management’s guidance range and partly offset core operating strength.

Nonperforming and Classified Assets Edge Higher

Nonperforming assets increased by $6.4 million, lifting the ratio from 1.07% to 1.12% of loans as a small set of credits migrated into problem status. Classified assets also rose modestly from 1.93% to 1.97% of loans, driven mainly by downgrades of nine relationships, though this was partially offset by reductions across six other credits.

Expense Growth and Efficiency Headwinds

Noninterest expense rose to $63.8 million, or $62.8 million excluding $1.0 million of notable items, up from $61.5 million in the prior quarter. Management reiterated expectations for mid-single-digit expense growth in 2024, acknowledging near-term efficiency pressure as they reinvest in people and technology to support longer-term operating leverage.

Deposit Competition and Pricing Pressure

Executives described an intense competitive environment for deposits, citing rival offers that limit the bank’s ability to lower funding costs further without additional rate relief. New deposits used to fund loan growth are likely to carry slightly higher costs than legacy balances, which could constrain margin expansion despite the better loan pricing backdrop.

Concentration Risk in Texas Growth Engines

A significant share of the recent growth came from Texas, particularly in Houston and Dallas–Fort Worth, where commercial relationships drove roughly $160 million to $184 million of CNI loan expansion. While these markets remain attractive and support above-peer growth, concentration risk in a handful of high-growth regions could become a pressure point if local economic conditions weaken.

Forward-Looking Guidance Signals Confident Growth Path

Management reaffirmed mid- to high-single-digit growth targets for both loans and deposits this year and noted that, after a strong first quarter, performance is tracking toward the upper end of those ranges. They expect NIM to recover from 3.71% to the high end of a 3.7% to 3.8% band by year-end, net interest income to grow mid- to high single digits, ROA to reach at least 1.15% on a run-rate basis, and fee and expense trends to both land in the mid-single- to high-single-digit range.

Origin Bancorp’s earnings call painted a picture of a bank leveraging strong markets, disciplined credit, and a solid capital base to drive steady, profitable growth. While margin, fee, and cost headwinds remain, management’s guidance and strategic investments suggest the institution is positioned to balance near-term pressures with long-term value creation for shareholders.