Business Overview and History Origin Bancorp, Inc. (OBK) is a financial holding company headquartered in Ruston, Louisiana, with its wholly-owned bank subsidiary, Origin Bank, founded in 1912. Deeply rooted in its history is a culture committed to providing personalized, relationship banking to businesses, municipalities, and personal clients to enrich the lives of the people in the communities it serves.
Origin Bancorp, Inc. was founded in 1991 and has grown to become a regional banking powerhouse, with over 60 locations spanning Texas, Louisiana, Mississippi, South Alabama, and the Florida Panhandle. The company's expansion has been fueled by a combination of organic growth and strategic acquisitions. Between 2005 and 2022, Origin completed four bank acquisitions, including the 2022 merger with BTH Bank, N.A. that solidified Origin's presence in the Dallas-Fort Worth market. The company has also entered de novo markets such as East Texas, Houston, South Alabama, and the Florida Panhandle to further expand its geographic reach.
To support its growth initiatives, Origin has raised over $589.6 million in new Tier 1 capital since 2006, including proceeds from its initial public offering in 2018 and the issuance of subordinated notes. These capital raises have provided Origin with the resources to execute its strategy and increase market share in key geographic markets.
Throughout its history, Origin Bancorp has demonstrated a commitment to sound financial management and prudent risk-taking. The company weathered the 2008 financial crisis without significant issues and has consistently maintained strong capital ratios, with a Tier 1 capital ratio of 13.52% and a total risk-based capital ratio of 16.44% as of December 31, 2024.
In recent years, Origin has faced certain challenges. In 2024, the company discovered questioned activity involving a former banker in its East Texas market. This activity resulted in the company recording a provision for loan credit losses of $4.1 million and a contingency reserve of $4.3 million during the year. The company continues to work with a third-party forensic accounting team to evaluate the full impact of this situation. Additionally, Origin faced the challenge of staying under the $10 billion asset threshold in 2023 and 2024 to avoid the impact of the Durbin Amendment. The company successfully managed its balance sheet to achieve this goal through client selection and strategic deposit gathering initiatives.
Financial Performance and Ratios Origin Bancorp's financial performance has been characterized by steady growth and profitability. For the year ended December 31, 2024, the company reported revenue of $564.59 million and net income of $76.5 million, or $2.45 per diluted share, representing a 9.6% decrease from the prior year's $2.71 per diluted share. The company's return on average assets (ROAA) for 2024 was 0.80%, while its return on average equity (ROAE) was 6.92%. Operating cash flow for 2024 was $108.48 million, with free cash flow of $86.43 million.
In the most recent quarter (Q4 2024), Origin reported revenue of $77.59 million and net income of $14.27 million, representing a year-over-year decrease of 23.4% compared to Q4 2023.
The company's net interest margin (NIM) has remained relatively stable, declining slightly from 3.23% in 2023 to 3.22% in 2024, as the impact of rising interest rates has been partially offset by disciplined deposit pricing and balance sheet optimization initiatives. Origin Bancorp's efficiency ratio, a measure of operating expenses as a percentage of revenue, was 71.14% in 2024, an improvement from 66.66% in the prior year.
Liquidity and Capital Position Origin Bancorp maintains a strong liquidity position to meet its short-term obligations and fund operations. As of December 31, 2024, the company reported cash and cash equivalents of $470.25 million. Additionally, Origin has access to borrowing capacity from the Federal Home Loan Bank (FHLB) of $2.15 billion and the ability to borrow $1.33 billion from the Federal Reserve discount window.
The company's debt-to-equity ratio stands at 0.145, indicating a conservative leverage position. Origin Bancorp and Origin Bank exceed all applicable well-capitalized regulatory capital requirements, with common equity Tier 1 capital ratios of 13.32% and 13.29%, respectively, and total risk-based capital ratios of 16.44% and 15.31%, respectively, as of December 31, 2024.
Optimize Origin: A Strategic Shift for Improved Profitability In 2024, Origin Bancorp unveiled its "Optimize Origin" initiative, a strategic plan focused on driving sustainable, elite-level financial performance. The plan is built on three primary pillars: productivity, delivery and efficiency; balance sheet optimization; and culture and employee engagement.
Under the productivity, delivery and efficiency pillar, Origin has undertaken a comprehensive analysis of its branch network and banker profitability, leading to the closure of 8 banking centers, primarily in the Dallas-Fort Worth market. These actions are expected to generate approximately $4.6 million in annual expense savings. Additionally, the company has repositioned its loan production teams, eliminating or reassigning lower-return bankers, which is anticipated to result in $6.7 million in annual expense reductions.
The balance sheet optimization pillar includes the planned redemption of $70 million in subordinated debt, which is expected to enhance the company's net interest income, as well as initiatives to improve the profitability of the mortgage banking business. Furthermore, Origin is working to increase its ownership stake in Argent Financial Group, a wealth management and trust services provider, with the goal of reaching over 20% ownership. This investment is expected to partially offset the future impact of the Durbin Amendment, which will limit debit card interchange fees for banks with over $10 billion in assets.
The culture and employee engagement pillar of Optimize Origin highlights Origin Bancorp's strong focus on attracting and retaining top talent. The company has been recognized as a "Best Bank to Work For" by American Banker magazine for 12 consecutive years, a testament to its commitment to employee satisfaction and engagement.
Business Segments and Operations Origin Bancorp's primary business segment is community banking, which generates the majority of the company's revenue and income. The community banking segment offers a variety of lending and deposit products and services to businesses, municipalities, and individual customers within its regional markets.
As of December 31, 2024, Origin Bank's loan portfolio held for investment (LHFI) totaled $7.57 billion, composed of: - Commercial real estate loans: $2.48 billion (32.7% of total LHFI) - Construction, land, and land development loans: $864.01 million (11.4% of total LHFI) - Residential real estate loans: $1.86 billion (24.5% of total LHFI) - Commercial and industrial loans: $2.00 billion (26.5% of total LHFI) - Mortgage warehouse lines of credit: $349.08 million (4.6% of total LHFI) - Consumer loans: $22.97 million (0.3% of total LHFI)
The commercial real estate, construction, and commercial and industrial loan segments have contributed significant interest income, generating $146.51 million, $73.91 million, and $163.87 million, respectively, in interest income for the year ended December 31, 2024.
Deposits, a primary funding source for Origin Bank's lending and investment activities, totaled $8.22 billion as of December 31, 2024, consisting of: - Noninterest-bearing demand deposits: $1.90 billion (23.1% of total deposits) - Money market accounts: $2.93 billion (35.6% of total deposits) - Interest-bearing demand deposits: $2.06 billion (25.1% of total deposits) - Time deposits: $941.00 million (11.4% of total deposits) - Brokered deposits: $80.23 million (1.0% of total deposits) - Savings accounts: $310.07 million (3.8% of total deposits)
The bank's deposit base has been a stable and low-cost source of funding, with total interest expense on deposits of $254.87 million for the year ended December 31, 2024, representing an average cost of 3.86%.
In addition to community banking, Origin Bancorp operates a mortgage banking segment and an insurance agency subsidiary, Forth Insurance. For the year ended December 31, 2024, the company generated $6.58 million in mortgage banking revenue and $26.76 million in noninterest income from the insurance segment.
Human Capital Management Origin Bancorp considers its employees to be a key competitive advantage and has implemented various initiatives to attract, retain, and develop talent. As of December 31, 2024, the company had 1,030 full-time equivalent employees who benefit from a range of benefits, including health and wellness programs, financial wellness initiatives, and opportunities for professional development and advancement.
Guidance and Outlook Looking ahead, Origin Bancorp's management team has provided guidance for 2025 that reflects the anticipated benefits of the Optimize Origin initiatives. The company expects to achieve a return on average assets (ROAA) run rate of 1% or greater by the fourth quarter of 2025, with a long-term target of reaching the top quartile of its peer group.
Additionally, the company is forecasting mid- to high single-digit loan growth in 2025, driven by its expanded presence in the Southeast market and the repositioning of its production teams. The net interest margin is expected to expand to 3.45% by the fourth quarter of 2025, with a full-year 2025 NIM of 3.40%, plus or minus 10 basis points, assuming 225 basis point Fed rate cuts.
Origin Bancorp expects the strategic actions they have taken and will continue to implement to drive earnings improvement of approximately $21 million annually on a pretax, pre-provision basis. Non-interest expense is projected to be flat to down slightly in Q4 2025 compared to Q4 2024, and up low single digits in 2025 compared to 2024, after excluding notable items.
In terms of credit quality, Origin reported a net recovery for Q4 2024, with net charge-offs coming in at 0.18% for the year. The company also reported a provision release of $5.5 million for Q4 2024, driven by a decrease in the collectively and individually evaluated portions of the reserve.
Conclusion Origin Bancorp's Optimize Origin initiative represents a strategic shift focused on driving sustainable, elite-level financial performance. By optimizing its branch network, enhancing banker productivity, and diversifying its revenue streams, the company is well-positioned to capitalize on growth opportunities in its dynamic markets while improving its profitability profile. With a strong focus on culture and employee engagement, Origin Bancorp continues to attract and retain top talent, further solidifying its competitive advantage in the regional banking landscape.