Release Date: January 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Origin Bancorp Inc (OBK, Financial) has implemented a strategic plan called 'Optimize Origin' aimed at achieving sustainable, elite-level financial performance.
- The company expects strategic actions to drive an ROA run rate of 1% or greater by the fourth quarter of 2025.
- Origin Bancorp Inc (OBK) has identified and is executing on $21 million in annual pretax, pre-provision earnings improvements.
- The company has successfully managed deposit costs and achieved core deposit growth, excluding brokered deposits.
- Origin Bancorp Inc (OBK) is investing in its workforce and systems to enhance productivity and efficiency, including a detailed banker profitability report.
Negative Points
- Deposits were down 3.1% during the quarter, although excluding brokered deposits, there was a slight growth.
- Loans, excluding mortgage warehouse, decreased by 3.2% linked quarter, driven by strategic focus on client selection and elevated paydowns.
- Classified loans increased to 1.57% of loans, up from 1.35% in the previous quarter, indicating some credit quality concerns.
- Non-performing loans increased to 0.99% from 0.81%, reflecting challenges in loan performance.
- The company reported a net expense of $14.7 million during the quarter, impacting earnings per share by $0.37.
Q & A Highlights
Q: Can you elaborate on the expected loan growth for 2025 and the cautious approach in 2024?
A: Drake Mills, Chairman and CEO, explained that the cautious approach in 2024 was due to the strategy to stay under $10 billion in assets, focusing on client selection and limiting CRE. For 2025, they are confident in returning to typical growth, focusing on C&I and owner-occupied CRE, expecting growth to accelerate in the latter half of the year.
Q: Regarding the optimization plan, how do the components contribute to achieving a 1% ROA by Q4 2025?
A: Drake Mills confirmed that the implementation of the five specific components of the optimization plan is expected to achieve a 1% ROA by Q4 2025. Additional initiatives like Argent and third-party benchmarking could further improve ROA beyond 1%.
Q: What is the timing for realizing the $21 million annualized benefit from the optimization plan?
A: William Wallace, CFO, detailed that benefits from branch consolidation and banker optimization will be fully realized by Q2 2025. Securities optimization and sub-debt redemption benefits will be seen in Q1 2025, with ongoing cash and liquidity management benefits.
Q: How confident are you in deposit betas performing in line with historical trends, and what is the strategy for core deposit growth?
A: William Wallace expressed confidence in deposit betas based on historical trends and recent performance. Lance Hall, President and CEO of Origin Bank, added that the incentive plan aligns banker behaviors with corporate goals, emphasizing deposit growth and market ROAs.
Q: What are the plans for restructuring the mortgage business, and is exiting the warehouse business considered?
A: Drake Mills stated that they love the warehouse business and plan slight growth in 2025. They are exploring more efficient ways to deliver mortgage products, acknowledging the need for change in response to market conditions.
Q: With strong capital levels, is there a plan to use the buyback, and how does M&A fit into future strategies?
A: Drake Mills indicated that capital is viewed as a runway for growth, focusing on organic growth and potential M&A opportunities. The buyback is a tool, but the priority is on strategic growth and preparing for crossing the $10 billion asset mark.
Q: Is there an opportunity for team lift-outs in 2025, and is this included in the expense guidance?
A: Drake Mills confirmed significant hiring opportunities, particularly for C&I teams that fit their culture. These are not included in the current expense guidance but are seen as a key growth strategy.
Q: How will reaching over 20% ownership in Argent Financial impact accounting and income statements?
A: William Wallace explained that surpassing 20% ownership would trigger equity method accounting, reflecting their share of Argent's earnings, partially offsetting the Durbin Amendment impact expected in 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
