Origin Bancorp (OBK) Q3 Earnings call transcript Oct 24, 2024
2min read In the third quarter earnings call of Origin Bancorp, Inc., the bank revealed a mixed picture of financial health and strategic initiatives, with a focus on returning to acceptable profitability levels while also laying the foundation for long-term value. The call, led by Chairman, President, and CEO, Drake Mills, provided insights into the company's operational performance, strategic initiatives, and market positioning.
Strategic Initiatives and Operational Highlights
Drake Mills highlighted the company's achievements since going public in 2018, including expanding market share, entering new markets, and building an award-winning culture. However, he acknowledged the challenges in achieving upper quartile profitability, which is a clear focus for the bank. The management team has been strategic in its preparation for crossing the $10 billion asset mark, making significant investments in people, technology, and risk management capabilities.
Martin Hall, President and CEO of Origin Bank, shared the bank's success in core deposit growth, with total deposits excluding brokered deposits up 2.3% quarter-over-quarter. This is the strongest growth in the last two years, driven by the bank's focus on expanding relationships and its success in the Texas markets. The bank's infrastructure in Texas, particularly in Metro Texas markets and its new Southeast market, positions it well for continued growth.
Financial Performance and Challenges
Jim Crotwell, Chief Financial Officer, provided an overview of the bank's financial performance, including the normalization of its loan portfolio and the reduction in past dues, classified loans, and nonperforming loans. While the bank experienced an increase in net charge-offs for the quarter, year-to-date net charge-offs remain in line with expectations. The bank's credit provision expense also decreased, reflecting the utilization of previously established reserves.
However, the bank's net interest margin expanded by only 1 basis point, below the expected mid-single-digit expansion. This was primarily due to higher deposit costs, particularly in interest-bearing accounts, which put pressure on the overall deposit costs. Despite this, the bank remains optimistic about its ability to keep up with deposit costs if the Fed continues to cut, with deposit betas on non-maturity interest-bearing deposits around 40%.
Strategic Focus and Growth Opportunities
The call also touched on the bank's strategic focus on returning to acceptable profitability levels by the end of next year, with a defined path to outperform peers. This includes a strategic initiative to sharpen the focus on near-term profitability, which involves benchmarking against peers and outlining specific revenue and expense opportunities. The bank is also investing in technology, particularly in its robotics process automation platform, which has saved approximately 3,356 hours of manual work in the third quarter.
Looking ahead, the bank is positioning itself for growth, particularly in its Texas and Southeast markets, where it has seen significant deposit and loan growth. The bank's strong liquidity and focus on credit quality set it up for a strong 2025, with expansion plans in place.
Conclusion
Overall, Origin Bancorp, Inc.'s third-quarter earnings call highlighted a company in the midst of strategic transformation, with a clear focus on returning to acceptable profitability levels while also investing in long-term growth. The bank's success in core deposit growth, particularly in its Texas markets, positions it well for continued expansion. The challenges around deposit costs and profitability, however, underscore the need for strategic focus and operational efficiency. As the bank moves forward, its ability to navigate these challenges and capitalize on growth opportunities will be key to its future success.
