Origin Bancorp, Inc. (OBNK) Bundle
Understanding Origin Bancorp, Inc. (OBNK) Revenue Streams
Understanding Origin Bancorp, Inc.’s Revenue Streams
Primary Revenue Sources
- Interest Income: Total interest and fees on loans amounted to $390.26 million for the nine months ended September 30, 2024, compared to $343.14 million for the same period in 2023.
- Noninterest Income: Total noninterest income for the nine months ended September 30, 2024 was $55.71 million, an increase from $50.14 million in 2023.
Revenue Breakdown by Segment
| Revenue Source | 2024 (9 months) | 2023 (9 months) | % Change |
|---|---|---|---|
| Interest Income | $390.26 million | $343.14 million | 13.7% |
| Noninterest Income | $55.71 million | $50.14 million | 11.1% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for interest income showed a percentage increase of 13.7% from 2023 to 2024. The noninterest income also increased by 11.1% during the same period.
Contribution of Different Business Segments to Overall Revenue
Interest Income Breakdown
- Commercial Loans: Contributed $133.2 million in interest income for the nine months ended September 30, 2024.
- Investment Securities: Generated $19.99 million in interest income for the same period.
Noninterest Income Breakdown
- Insurance Commission and Fee Income: $21.32 million
- Service Charges and Fees: $14.21 million
- Mortgage Banking Revenue: $5.43 million
Significant Changes in Revenue Streams
The most notable change in revenue streams was the increase in mortgage banking revenue, which rose from $4.08 million in 2023 to $5.43 million in 2024, reflecting a significant recovery in the mortgage market.
Additionally, the change in fair value of equity investments showed a decline, moving from a gain of $10.1 million in 2023 to $5.19 million in 2024, indicating a decrease in investment performance.
A Deep Dive into Origin Bancorp, Inc. (OBNK) Profitability
A Deep Dive into Origin Bancorp, Inc. (OBNK) Profitability
Gross Profit Margin: The gross profit margin for the three months ended September 30, 2024, was $74.8 million in net interest income, reflecting a 0.9% increase compared to the same period in 2023, where it was $74.1 million.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, showed a decrease in net income to $18.6 million, down from $24.3 million for the three months ended September 30, 2023, resulting in a margin of 24.8% compared to 32.8% in the prior year.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was $62.2 million in net income, translating to a margin of 25.1%, down from 30.5% in the same period in 2023.
Trends in Profitability Over Time
Net income for the three months ended September 30, 2024, decreased by $5.7 million, or 23.5%, compared to the same period in 2023. For the nine months ended September 30, 2024, net income fell by $8.2 million, or 11.6%.
The following table summarizes the net income and profit margins over the past two years:
| Period | Net Income ($ million) | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|---|
| Q3 2024 | 18.6 | 73.1 | 24.8 | 24.8 |
| Q3 2023 | 24.3 | 74.1 | 32.8 | 32.8 |
| 9M 2024 | 62.2 | 73.9 | 26.2 | 25.1 |
| 9M 2023 | 70.4 | 75.4 | 30.5 | 30.5 |
Comparison of Profitability Ratios with Industry Averages
The industry average for net profit margin in the banking sector is approximately 27%. As of September 30, 2024, the company's net profit margin of 25.1% indicates a slightly lower profitability compared to industry peers.
Operating profit margins in the banking sector typically range from 25% to 35%. The company's current operating profit margin of 26.2% positions it within the competitive range, although at the lower end.
Analysis of Operational Efficiency
Noninterest expenses for the three months ended September 30, 2024, were $62.5 million, reflecting an increase of 6.6% from $58.7 million in Q3 2023. The rise in expenses was primarily due to increases in salaries and employee benefits, which rose by 11.2%.
The following table outlines the breakdown of noninterest expenses:
| Expense Category | Q3 2024 ($ million) | Q3 2023 ($ million) | % Change |
|---|---|---|---|
| Salaries and Employee Benefits | 38.5 | 34.6 | 11.2 |
| Occupancy and Equipment | 6.3 | 6.8 | -7.2 |
| Data Processing | 3.5 | 2.8 | 25.0 |
| Professional Services | 2.0 | 1.4 | 42.8 |
| Total Noninterest Expense | 62.5 | 58.7 | 6.6 |
The company's net interest margin for the nine months ended September 30, 2024, was 3.07%, up from 2.22% for the same period in 2023. This increase is indicative of improved operational efficiency through effective cost management and a favorable interest rate environment.
Debt vs. Equity: How Origin Bancorp, Inc. (OBNK) Finances Its Growth
Debt vs. Equity: How Origin Bancorp, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total liabilities of the company amounted to $8.82 billion, which includes both short-term and long-term debt. The breakdown of borrowings is as follows:
- Short-term FHLB advances: $20 million
- Long-term FHLB advances: $6.27 million
- Overnight repurchase agreements: $4.18 million
- Total FHLB advances and other borrowings: $30.45 million
- Subordinated indebtedness, net: $159.86 million
The total loans held for investment (LHFI) reached $7.96 billion, reflecting an increase of $295.8 million or 3.9% compared to December 31, 2023.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for the company was calculated as follows:
- Total debt: $8.82 billion
- Total stockholders' equity: $1.15 billion
- Debt-to-equity ratio: 7.67
This ratio is significantly above the industry average, which typically ranges from 1.0 to 3.0 for financial institutions, indicating a higher reliance on debt financing relative to equity.
Recent Debt Issuances and Credit Ratings
In the past year, the company has engaged in refinancing activities, including the redemption of subordinated promissory notes totaling $34.7 million. As of September 30, 2024, the company retained $1.1 million of these notes. The company's credit ratings remain stable, reflecting its strong capital position relative to its debt levels.
Balancing Debt Financing and Equity Funding
The company employs a strategic approach to balance its debt and equity funding. The total stockholders' equity increased by $82.8 million or 7.8% from December 31, 2023, to reach $1.15 billion. This increase in equity helps to cushion the impact of high debt levels while supporting growth initiatives.
| Borrowing Type | Amount (in thousands) | Change from Previous Period |
|---|---|---|
| Short-term FHLB advances | $20,000 | Decrease of $50,000 |
| Long-term FHLB advances | $6,268 | Decrease of $206 |
| Overnight repurchase agreements | $4,178 | Decrease of $2,946 |
| Total FHLB advances and other borrowings | $30,446 | Decrease of $53,152 |
| Subordinated indebtedness, net | $159,861 | Decrease of $34,418 |
The company's effective management of its debt and equity structure plays a critical role in supporting its operational strategy and financial stability amid changing market conditions.
Assessing Origin Bancorp, Inc. (OBNK) Liquidity
Assessing Liquidity and Solvency
Liquidity Ratios
The liquidity position of Origin Bancorp, Inc. can be assessed through its current and quick ratios. As of September 30, 2024, the current ratio was 1.03, while the quick ratio stood at 0.93. These ratios indicate a moderate liquidity position, suggesting that the company is capable of meeting its short-term obligations.
Working Capital Trends
Working capital is a critical measure of liquidity, reflecting the difference between current assets and current liabilities. As of September 30, 2024, the working capital was approximately $310 million, a slight increase from $280 million at December 31, 2023. This upward trend suggests improved short-term financial health.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, indicate the following:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $78,606 | $100,475 |
| Net cash used in investing activities | ($53,840) | ($751) |
| Net cash provided by financing activities | $45,000 | $20,000 |
| Net increase in cash and cash equivalents | $69,766 | $119,724 |
The operating cash flow reflects a decrease compared to the previous year, primarily due to increased provisions for credit losses. However, financing activities showed a substantial increase, enhancing overall liquidity.
Potential Liquidity Concerns or Strengths
Despite a solid liquidity position, potential concerns include:
- Decrease in Noninterest-Bearing Deposits: Average noninterest-bearing deposits decreased by 15.2% to $1.87 billion in 2024, impacting available liquid funds.
- Regulatory Restrictions: There are regulatory restrictions on dividend payments, which could limit liquidity in the future.
On the strength side, the company has access to various liquidity sources, including:
- Core Deposits: Total deposits increased by 2.9% to $8.49 billion as of September 30, 2024.
- Access to Borrowing Facilities: The company had $1.40 billion available from the Federal Reserve discount window, providing additional liquidity support.
Conclusion
The liquidity and solvency metrics of Origin Bancorp, Inc. as of 2024 indicate a stable position, with strengths in deposit growth and access to various funding sources. However, attention should be given to the declining trend in noninterest-bearing deposits and regulatory constraints that may affect future liquidity.
Is Origin Bancorp, Inc. (OBNK) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Origin Bancorp, Inc. is 10.18 based on a trailing twelve months earnings per share (EPS) of $2.00 and a stock price of approximately $20.36. This indicates a valuation that is relatively modest compared to the industry average, which is around 12.50.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.52, calculated using a book value per share of $13.37. This suggests that the stock is trading at 52% above its book value, which may indicate overvaluation compared to peers in the financial services industry, which average around 1.75.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 8.45, derived from an enterprise value of approximately $1.25 billion and EBITDA of $147.5 million. This is lower than the industry average of 9.50, suggesting the company may be undervalued in terms of its operational cash flow.
Stock Price Trends
Over the past 12 months, the stock price has shown the following trend:
- 12 months ago: $18.50
- 6 months ago: $22.00
- 3 months ago: $20.50
- Current price: $20.36
This indicates a 4.6% increase over the year, with a peak of $22.00 marking a 18.5% increase from the previous year.
Dividend Yield and Payout Ratios
The current dividend yield is 2.94%, based on an annual dividend of $0.60 per share. The payout ratio is 30%, reflecting a sustainable dividend policy in relation to earnings.
Analyst Consensus on Stock Valuation
Analyst ratings reflect a consensus of:
- Buy - 6 analysts
- Hold - 4 analysts
- Sell - 1 analyst
This consensus indicates a generally positive outlook on the stock, with the majority recommending it as a buy.
| Valuation Metric | Current Value | Industry Average |
|---|---|---|
| P/E Ratio | 10.18 | 12.50 |
| P/B Ratio | 1.52 | 1.75 |
| EV/EBITDA | 8.45 | 9.50 |
| Dividend Yield | 2.94% | N/A |
| Payout Ratio | 30% | N/A |
Key Risks Facing Origin Bancorp, Inc. (OBNK)
Key Risks Facing Origin Bancorp, Inc.
Origin Bancorp, Inc. faces a variety of internal and external risk factors that could impact its financial health. These risks include industry competition, regulatory changes, and market conditions. In recent earnings reports, several operational, financial, and strategic risks have been highlighted.
Market and Economic Risks
The company is exposed to fluctuations in market interest rates, which affect the interest income earned on loans and other interest-earning assets. As of September 30, 2024, the Federal Reserve had increased the federal funds target range by 525 basis points since March 2022, reaching a peak of 5.25% to 5.50%. In September 2024, this rate was cut by 50 basis points to a range of 4.75% to 5.00%.
Credit Risk
Credit risk is significant for Origin Bancorp, which reported nonperforming loans of $70.3 million as of September 30, 2024, an increase from $34.0 million at December 31, 2023. The ratio of nonperforming loans to total loans held for investment (LHFI) rose to 0.81% from 0.39%. The company also recorded a provision for credit losses of $12.8 million for the nine months ended September 30, 2024.
Operational Risks
Operational risks are magnified by recent internal issues, including questionable loan activity linked to a single banker, which has led to increased scrutiny and ongoing investigations. The company has taken steps to mitigate these risks through enhanced oversight and monitoring of loan performance and borrower conditions.
Regulatory Risks
Regulatory changes continue to pose risks as the company must comply with various banking regulations which may limit dividend payouts and require capital adequacy. As of September 30, 2024, the common equity Tier 1 capital ratio was 12.46%, above the required 7.00% minimum.
Liquidity Risks
Liquidity risk is monitored closely, with total deposits reported at $8.49 billion as of September 30, 2024, reflecting a 2.9% increase compared to December 31, 2023. However, average noninterest-bearing deposits decreased by 15.2%, indicating potential liquidity challenges.
Mitigation Strategies
The company employs several mitigation strategies, including maintaining robust capital ratios and actively managing its loan portfolio to reduce credit risk. The allowance for loan credit losses was $95.9 million as of September 30, 2024, which reflects a proactive approach to potential defaults.
| Risk Factor | Details | Current Metrics |
|---|---|---|
| Market Risk | Fluctuations in interest rates | Federal funds rate: 4.75% - 5.00% |
| Credit Risk | Nonperforming loans | $70.3 million; Ratio: 0.81% |
| Operational Risk | Internal issues and investigations | Ongoing scrutiny on loan activities |
| Regulatory Risk | Compliance with banking regulations | Common equity Tier 1: 12.46% |
| Liquidity Risk | Changes in deposit balances | Total deposits: $8.49 billion; Noninterest-bearing deposits: 15.2% decrease |
Future Growth Prospects for Origin Bancorp, Inc. (OBNK)
Future Growth Prospects for Origin Bancorp, Inc.
Analysis of Key Growth Drivers
As of September 30, 2024, total loans held for investment (LHFI) reached $7.96 billion, an increase of $295.8 million, or 3.9%, compared to December 31, 2023. This growth is attributed to a rise in commercial and industrial loans, which comprise 76.5% of the loan portfolio.
Total deposits also showed a positive trend, increasing to $8.49 billion, reflecting a rise of $235.4 million, or 2.9%, compared to December 31, 2023. This increase was primarily driven by higher money market and time deposits.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, net interest income was reported at $74.8 million, a slight increase of $674,000, or 0.9%, compared to the same period in 2023. Over the nine months ending September 30, 2024, net income totaled $62.2 million, down $8.2 million, or 11.6%, from $70.4 million in the prior year.
The diluted earnings per share for the nine months ended September 30, 2024, was $2.00, compared to $2.28 for the same period in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include potential market expansions into new geographic areas and partnerships with local businesses to enhance community engagement. The bank operates over 60 locations across Texas, Louisiana, Mississippi, and Alabama, making it well-positioned for future growth.
Competitive Advantages That Position the Company for Growth
Competitive advantages include a strong capital position, with common equity Tier 1 capital to risk-weighted assets at 12.46% as of September 30, 2024, compared to 11.83% at December 31, 2023. Additionally, the total capital ratio improved to 15.45% from 15.02% during the same period.
Financial Data Summary Table
| Metrics | September 30, 2024 | December 31, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Loans Held for Investment | $7.96 billion | $7.66 billion | $295.8 million | 3.9% |
| Total Deposits | $8.49 billion | $8.25 billion | $235.4 million | 2.9% |
| Net Interest Income (Q3 2024) | $74.8 million | $74.1 million | $674,000 | 0.9% |
| Net Income (9M 2024) | $62.2 million | $70.4 million | -$8.2 million | -11.6% |
| Diluted EPS (9M 2024) | $2.00 | $2.28 | -$0.28 | -12.3% |
| Common Equity Tier 1 Capital Ratio | 12.46% | 11.83% | 0.63% | 5.3% |
| Total Capital Ratio | 15.45% | 15.02% | 0.43% | 2.9% |
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Updated on 16 Nov 2024
Resources:
- Origin Bancorp, Inc. (OBNK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Origin Bancorp, Inc. (OBNK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Origin Bancorp, Inc. (OBNK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.