Sign in
OB

Origin Bancorp, Inc. (OBK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 diluted EPS was $0.46 on net income of $14.3M; NIM-FTE expanded 15 bps to 3.33% as deposit costs fell and optimization actions aided margins, while net interest income rose to $78.3M, the highest in two years .
  • Noninterest income turned negative (-$0.33M) driven by a strategic bond portfolio sale realizing a $14.6M loss, which reduced EPS by $0.37; management expects a 2.4-year earnback and +7 bps total NIM-FTE impact over the next 12 months .
  • Provision for credit losses was a $5.4M benefit (release) as LHFI excluding mortgage warehouse fell $237M and recoveries improved; however, nonperforming LHFI rose to 0.99% and classified loans increased to $118.8M, reflecting specific relationships and single-family exposures .
  • Deposits declined 3.1% QoQ to $8.22B on brokered roll-offs; noninterest-bearing deposits were 23.1% of total, with ex-brokered mix at 23.3% .
  • New “Optimize Origin” framework targets ≥1% ROAA run-rate by Q4 2025, mid-to-high single-digit loan growth, margin expansion (NIM-FTE 3.45% Q4 2025; 3.40% FY 2025), expense reductions via branch consolidation, and sub-debt redemption; catalysts include continued beta discipline and optimization benefits .

What Went Well and What Went Wrong

What Went Well

  • NIM-FTE rose 15 bps QoQ to 3.33% as rates paid on interest-bearing liabilities fell 40 bps and optimization added 3 bps; net interest income climbed 4.7% to $78.3M, “at its highest level in two years” .
  • Management exceeded internal margin expectations: “net interest margin expanded 15 basis points…well above our expectations for roughly 10 basis points of margin compression,” aided by better loan yields and deposit costs .
  • Provision release of $5.4M and net recoveries improved credit cost optics; East Texas questioned activity saw reserve releases and contingency set-asides, with management reiterating immaterial ultimate loss expectations .
  • Strategic actions underway: branch closures and banker profitability optimization to drive ~$21M pre-tax pre-provision annual uplift; margin tailwinds expected from securities trade and planned bank-level sub-debt redemption .

What Went Wrong

  • Noninterest income was negative (-$0.33M) due to the $14.6M securities loss; core fee lines (insurance commissions) saw seasonal softness .
  • Asset quality metrics ticked up: nonperforming LHFI rose to 0.99% (up 18 bps QoQ) and classified loans increased to $118.8M, including four relationships totaling $14.4M and single-family exposures; past dues rose to 0.56% .
  • Loans fell 4.8% QoQ to $7.57B, with significant declines in mortgage warehouse lines (-$146.1M) and construction/land/land development (-$127.5M), and deposits fell 3.1% QoQ on brokered runoff, lifting efficiency ratio to 83.85% .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income ($M)$72.989 $73.890 $74.804 $78.349
Total Noninterest Income ($M)$8.196 $22.465 $15.989 $(0.330)
Total Noninterest Expense ($M)$60.906 $64.388 $62.521 $65.422
Net Income ($M)$13.425 $20.989 $18.601 $14.270
Diluted EPS ($)$0.43 $0.67 $0.60 $0.46
NIM-FTE (%)3.19 3.17 3.18 3.33
Cost of Total Deposits (%)2.84 3.08 3.14 2.79
ROAA (annualized, %)0.55 0.84 0.74 0.57
Efficiency Ratio (%)75.02 66.82 68.86 83.85

Segment breakdown (Loans Held for Investment – Q4 2024):

CategoryQ4 2024 ($M)
Owner-Occupied CRE$975.947
Non-Owner-Occupied CRE$1,501.484
Construction/Land/Development$864.011
Residential Real Estate – Single Family$1,432.129
Multi-Family Real Estate$425.460
Commercial & Industrial$2,002.634
Mortgage Warehouse Lines (MW LOC)$349.081
Consumer$22.967
Total LHFI$7,573.713

KPIs and Mix

KPIQ3 2024Q4 2024
Total Deposits ($M)$8,486.568 $8,223.120
Noninterest-Bearing Deposits (% of total)22.3% 23.1%
Brokered Deposits ($M)$431.609 $80.226
Total LHFI ($M)$7,956.790 $7,573.713
ALCL / Total LHFI (%)1.21 1.20
Nonperforming LHFI / LHFI (%)0.81 0.99

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM-FTE (%)Q4 2025n/a3.45% ±10 bps Introduced
NIM-FTE (%)FY 2025n/a3.40% ±10 bps Introduced
Loan Growth (ex-Warehouse)FY 2025n/aMid- to high-single digits Introduced
Deposit GrowthFY 2025n/aMid-single digits Introduced
Net Interest Income GrowthFY 2025n/aMid- to high-single digits Introduced
Noninterest Income GrowthQ4 2025n/aMid-single digits Introduced
Noninterest Income GrowthFY 2025n/aLow- to mid-single digits Introduced
Noninterest Expense GrowthQ4 2025n/aFlat to down slightly Introduced
Noninterest Expense GrowthFY 2025n/aLow-single digits Introduced
Tax RateFY 2025 & Q4 2025n/a~21.5% Introduced
ROAA Run-Rate TargetQ4 2025n/a≥1% Introduced
Pre-tax Pre-provision BenefitOngoingn/a~$21M annual uplift Introduced
Sub-debt RedemptionQ1 2025n/aPlan to redeem ~$70M bank-level sub debt (mid-February) Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Deposit Betas & ALMElevated deposit costs; stabilization, detailed beta modeling coming; NIB downtrend noted Expected NIM compression; deposit beta assumption conservative; deposit growth ex-brokered up Achieved 15 bps NIM expansion; deposit betas ~historical (~50% on non-maturity); cost of deposits fell to 2.79% Improving margin dynamics
Balance Sheet OptimizationNotable items incl. questioned banker activity reserves; early optimization talk Outlined profitability initiative; more detail promised “Optimize Origin” launched with defined pillars and quantified benefits; securities trade executed Formalized program, execution underway
Loan Growth & MixMW LOC up; construction down; cautious growth Loan growth flat; client selection constrained growth; plan for low single-digit growth QoQ loans down; strategy to reaccelerate to mid/high single-digit in 2025; focus on C&I and owner-occupied CRE Near-term trough; build to growth
Mortgage BusinessMSR impairment/gain variability; warehouse strong Discussed deposit costs; mortgage seasonal; no restructure specificsStudying mortgage delivery “reimagination” to improve returns; maintain warehouse Restructure in evaluation
East Texas IssueIdentified; reserves and provisions recorded; investigation ongoing Past dues, nonperformers improved QoQ; contingency recognized Reduced specific classified/nonperforming balances tied to issue; released provision and added contingency; expected immaterial ultimate loss Progressing resolution
CRE Office ExposureNo past dues/NPLs; strong metrics (DSC/LTV) Continued resilient metrics; minimal classifieds Still no past dues/NPLs; portfolio $351M, avg loan $2.2M, LTV 58%; ALCL/loans 0.69% Stable

Management Commentary

  • “Optimize Origin…is the continual enhancement of our award-winning culture and the drive for elite financial performance…We believe the actions we have taken will drive earnings improvement of approximately $21 million annually on a pre-tax pre-provision basis.” — Drake Mills (Chairman, President & CEO) .
  • “Net interest margin expanded 15 basis points…well above our expectations…primary drivers were better-than-expected loan yields and deposit costs.” — Wally Wallace (CFO) .
  • “We announced the closing of 8 banking centers…creating a run rate of approximately $4.6 million in annual expense reduction.” — Lance Hall (President & CEO, Origin Bank) .
  • “We reported a net recovery for the quarter…Past due loans HFI came in at 0.56%…classified loans increased…nonperforming loans also increased to 0.99%.” — Jim Crotwell (Chief Risk Officer) .

Q&A Highlights

  • Loan growth inflection: Management expects mid- to high-single-digit loan growth in 2025, reaccelerating in H2, focused on C&I and owner-occupied CRE, after operating under asset constraints (10B threshold) in 2024 .
  • Timing of ~$21M benefits: Branch consolidation benefit halves in Q1 and full run-rate in Q2; banker optimization fully in run-rate by Q1; securities trade half in Q4 and remainder in Q1; bank sub-debt redemption mid-February .
  • Deposit betas & incentives: Historical beta (~50% on non-maturity) observed post-September cuts; 2025 banker incentives shift back to ~50/50 loan/deposit balancing to drive core growth .
  • Mortgage strategy: Maintain warehouse; evaluating delivery changes to improve efficiency and returns in consumer mortgage .
  • Capital & M&A: Buyback available, but capital prioritized for organic growth and sub-debt redemption; M&A optionality maintained given market dislocation .
  • Argent Financial: Target >20% stake to move to equity-method accounting in 2025 (likely Q2 timing), partially offsetting eventual Durbin impact (~$5.5–$6.0M pretax annually from Q3 2026) .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 and recent quarters were unavailable at the time of analysis due to data access limits; therefore, formal beat/miss versus Street cannot be assessed here (Values retrieved from S&P Global were unavailable).
  • Company-reported notable items reduced Q4 EPS by $0.37 (securities loss) and added contingency/optimization costs, while margin performance was better than internal expectations; Street models may need to reflect optimization timing and deposit beta trajectory .

Key Takeaways for Investors

  • Margin tailwinds are material: 15 bps NIM-FTE expansion with deposit cost relief and optimization actions suggest positive carry into 2025; guidance embeds further expansion with disciplined betas and liquidity management .
  • Earnings quality: Q4 results reflect transitory notable items (securities loss, contingency) and a provision release; underlying NII momentum is strong; watch the pace of fee normalization and expense saves realization .
  • Balance sheet repositioning: Securities trade improves yield and expected NII by ~$5.6M annually with a 2.4-year earnback, and sub-debt redemption should lower funding costs; these are identifiable catalysts for 2025 .
  • Growth reacceleration: After staying below $10B in 2024, management plans mid/high-single-digit loan growth, funded by deposit growth and on-balance sheet liquidity; focus on C&I/OO CRE in Texas and new Southeast market .
  • Credit watchpoints: Nonperforming/ classified metrics ticked up QoQ; single-family exposures drove part of the increase; continued client selection and workout progress will be key; CRE office remains resilient .
  • Optimize Origin execution: Quantified ~$21M PTPP benefit from branch/banker/securities/capital/liquidity actions with clear Q1/Q2 2025 ramps; monitor delivery against timeline .
  • Regulatory horizon: Durbin impact expected in H2 2026 if crossing $10B in 2025; Argent equity-method shift targeted to partially offset; consider medium-term fee headwinds in valuation .