Origin Bancorp: Navigating Market Volatility in 2024

Origin Bancorp, Inc. (NYSE: OBK), the holding company for Origin Bank, reported its full-year 2024 earnings on January 22, 2025, missing analysts' expectations. The company's net income for the year ended December 31, 2024, was $76.5 million, or $2.45 diluted earnings per share, representing a decrease of $0.26, or 9.6%, from diluted earnings per share of $2.71 for the year ended December 31, 2023. Pre-tax, pre-provision ("PTPP") earnings for the year ended December 31, 2024, was $104.7 million, representing a decrease of $18.0 million, or 14.6%, from the year ended December 31, 2023.

The company's earnings missed expectations primarily due to the impact of interest rate fluctuations and market volatility. Origin Bancorp's long-term perspective has influenced its decision-making processes, contributing to its overall performance in 2024. The company's strategic focus on building long-term relationships with clients and communities has driven its organic growth in both deposits and loans. However, the volatile market conditions and interest rate changes have presented challenges that the company has had to navigate.

One of the key factors contributing to the company's earnings miss was the reduction in the federal funds target rate range by 50 basis points on September 18, 2024, to a range of 4.75% to 5.00%. This reduction in interest rates negatively impacted the net interest income and net interest margin of the company. Higher interest rates on savings and interest-bearing transaction accounts drove a $1.1 million increase in interest expense compared to the quarter ended June 30, 2024. The average rate on interest-bearing deposits increased to 4.01% for the quarter ended September 30, 2024, compared to 3.95% for the quarter ended June 30, 2024.

To mitigate these risks, Origin Bancorp has taken several steps, including implementing a bond portfolio optimization strategy to enhance long-term yields and improve overall portfolio performance. This strategy positively impacted the NIM-FTE by three basis points for the quarter ended December 31, 2024, and is estimated to provide a total positive impact to NIM-FTE of seven basis points in the twelve months following the date of sale. The company also plans to drive earnings improvement of approximately $21 million annually on a pre-tax pre-provision basis by optimizing securities, capital, and cash/liquidity management.

Origin Bancorp's long-term perspective has influenced its decision-making processes, leading to organic growth, strategic investments, and capital optimization. These factors have contributed to the company's overall performance in 2024, as demonstrated by its increased net income, diluted earnings per share, and strong financial ratios. However, the volatile market conditions and interest rate changes have presented challenges that the company has had to navigate.

In conclusion, Origin Bancorp's earnings miss in 2024 can be attributed to the impact of interest rate fluctuations and market volatility. The company's long-term perspective has influenced its decision-making processes, contributing to its overall performance in 2024. To mitigate these risks, Origin Bancorp has taken several steps, including implementing a bond portfolio optimization strategy and optimizing securities, capital, and cash/liquidity management. Despite these challenges, the company's strong financial performance and strategic focus on long-term growth and value creation for shareholders remain intact.