Origin Bancorp’s Earnings Call: Mixed Sentiments and Strategic Plans

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

Origin Bancorp, Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. While the company showcased strong performance in areas like net interest margin expansion, deposit growth, and employee engagement, concerns were raised about increased past due and non-performing loans. Additionally, pressures on non-interest income due to restructuring efforts were noted, and optimism for loan growth was tempered by economic uncertainty.

Net Interest Margin Expansion

The company reported an impressive expansion of its net interest margin by 11 basis points, reaching 3.44% for the quarter, surpassing expectations. This positive trend led to an increase in margin guidance by 5 basis points, setting a target of 3.50% for the fourth quarter of 2025.

Deposit Growth

Origin Bancorp experienced a 7.2% annualized growth in deposits, excluding brokered deposits. Notably, non-interest-bearing deposits saw their first year-over-year growth since Q4 2022, signaling a positive shift in deposit trends.

Loan Growth and Portfolio Optimization

Despite facing macroeconomic challenges, the company remains optimistic about achieving mid to high-single-digit loan growth in 2025. They have successfully reduced approximately $50 million in targeted reductions, totaling $200 million over the past four quarters.

Employee Engagement and Culture

The company reported high levels of employee engagement, ranking within the global top 10% benchmark. This indicates strong alignment with strategic goals and a positive corporate culture.

Tangible Book Value and Capital Ratios

Tangible book value continued its upward trajectory, growing to $32.43, marking the tenth consecutive quarter of growth. The TCE ratio concluded the quarter at 10.6%, reflecting a solid capital position.

Increase in Past Due and Non-Performing Loans

Concerns were raised as past due loans for investment rose to 0.96% from 0.56%, and non-performing loans increased by $6.4 million, reaching 1.07% from 0.99%.

Pressure on Non-Interest Income

The company anticipates a decline in non-interest income by $400,000 to $500,000 quarterly starting in Q3, attributed to changes in the mortgage business.

Economic Uncertainty and Impact on Loan Growth

Macroeconomic uncertainty and recent policy announcements have led to adjustments in loan growth expectations, now positioned at the lower end of the guided range.

Forward-Looking Guidance

Origin Bancorp’s strategic plan, Optimize Origin, aims for a return on assets (ROA) run rate of 1% or greater by Q4 2025, with a long-term goal of reaching the top quartile of peers. The company expects an annual pre-tax earnings improvement of approximately $1.5 million from restructuring its mortgage business. Despite challenges, the company maintains guidance for mid to high-single-digit loan growth in 2025.

In conclusion, Origin Bancorp’s earnings call presented a balanced outlook, with strong performances in certain areas countered by challenges in others. The company’s strategic initiatives and forward-looking guidance reflect a commitment to navigating economic uncertainties while striving for growth and stability.