OBK - Earnings call transcript Q1 2024

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Operator

Ladies and gentlemen, good morning, and welcome to the Origin Bancorp, Inc.

First Quarter Earnings Conference Call. My name is David, and I will be your evercall coordinator.

The format of today's call includes prepared remarks from the company, followed by a question-and-answer session. Please note that this event is being recorded. Instructions]. [Operator like of conference Investor now Chris over turn Director Reigelman, Relations. to would call the to I Please, Chris, go ahead.

Chris Reigelman

of yesterday Good morning, issued a our release We refer with we the during us joining available slide copy website, afternoon, presentation along and thank our this you earnings call. for which on is will that today. to press

measures. statements Please safe harbor our presentation, which and of refer use includes to Page X of non-GAAP financial regarding our forward-looking slide statements

please note For slide you those by phone, website of available is www.origin.bank. our the on joining presentation at

presentation available also Page filed our Please All are in that safe and note SEC slide safe the of harbor comments release earnings statements earnings release. to are today's call statements subject on our during yesterday. X harbor with our

Bancorp's Risk and Chief happy by our Jim Drake Moore. be Bank, I'm you to CEO, President of Banking Officer, they'll Chief morning our Chief address may After Lance Officer, Chief and Brolly; Hall; Preston the joined Wallace, Officer, this Chairman, presentation, Wally President questions and CEO any our have. Origin Steve Credit Crotwell; and Accounting Officer, Origin Financial Mills;

the yours. call is Drake,

Drake Mills

conditions footprint as This each maximizing very and we quarter, Chris. good teams good as amidst the production focus and with showed with market efficiency loan experienced pleased Thanks, to our continue demonstrated shareholder has improve performance progress across sharp past a deposit I'm with growth. our on value. team challenging our resilience

and with customers. our our Our continued relationships organic growth progress in long-term strategy building reflects

was at but into will grew growth. our of quarter. the pre-provision diluted X% the $X.XX. value deposit about end earnings book I'm get the of X.X% pretax of ratio our $XX.X EPS We and specifics, finished to TCE $XX.XX more optimistic and quarter Tangible with Lance million

saw bankers we $XXX million deposits, of delivering. our an testament our strategy understanding the to quarter. is This increase a brokered and for Excluding

and deposit top will the to this year. remains loan exceeded be While the growth growth growth priority governor loan core deposit for a quarter, growth the

and As we threshold. and and discussed year, in preparation across our previous the calls, asset At potential investments explore write $XX we of made asset sale. its to we the the of end MSR value the to strategic decisions make decision the down continue billion

successful During quarter, volatility and MSR selling in the the first as reduce we we from were This $XX assets. prepare in cross regulatory earnings removed to asset. risk will stream our billion

are While profitability. we are of strategically with our pleased this we on the improving results quarter, focused

it's like building opportunities South the company. We our Florida drive revamp revenue Whether our better more in new a is Origin continue to efficient base. entry more committed and to identify markets in recent our taken we've recently to and Panhandle investments to business, the steps profitable or expense leverage mortgage the Alabama,

to Lance. it turn I'll Now over

Martin Hall

morning. good and Thanks,

of been on funding have with bankers fully I'm Our all throughout deposit customer of markets, extremely growth growth loan and our this our these pleased goal across year. drive they understand focused deposit the I'm I remain achieve that efforts we to with deposits. our the growth quarter. confident markets, bankers for trends on to based And our seeing will first in commitment the

we this to As most to effective the continue leaders have geographic a organization. To believe that build we deliver this to strategic decision-makers point, for past our our management and model communities structure differentiator, our throughout to markets are better is clients, will and geographic empowered management future This hired team decision management model to strategy. more strategic dynamic teams acquired. our there our banking realign additional serve effectively when or for treasury scale our the banks built, made the to treasury quarter,

and drive being will more expand successful, income highly ability our treasury management deposits additional efficient. our we while While been fee this to team growth has believe

advisers often loan loyalty the and talk deposit remain relationship applies client and being trusted with to full selection need clients. our our with bankers and to building also strategically We unwavering growth. philosophy. drive committed to about We This our the

are talked company. we about I've often experience and to efficiencies drive using how technology enhance client across our the

see robotic entire use of of results, with of process one to the is saved Through first work X,XXX XXXX. of we the team. our We in for which what save automation have approximately XX% about manual in positive bots, continue That's XXXX. hours quarter we the of year

also not These efficient more risk but and efforts save the reduce make us only company. to time

XX% while have of Since thousands reduced dollars bot. for mobile automation an we I'm and move this year-over-year. what using production bot, example, with began we deposit to by as they As forward. do loss mobile about XX we our clients our loss have Currently, delivering in have continue deposit processes prevented fraud very we optimistic our using team, in approximately we fraud RPA will

plan our competitive talk is we for accomplishments over our I I Before has We as our about become Jim, for culture. us out our engagement differentiator our celebrate reflect year, culture, year. turn Every employees strategic in passion and March the it to to as and acknowledge our that impressive. have all culture commitment and now bankers. company, and to our culture right energy want on month, our where, designate their of markets attracting a best-in-class lay a across driving we The It employee employees often.

culture and We lose our to relationships. building commitment long-term never of will sight our

to Jim. turn over Now will I it

Jim Crotwell

Thanks, Lance.

percentage a as increased levels. XXXX on X.XX% held loans the classified from acceptable from continued due X only at only end, quarter loans within at year-end, XX basis million of basis million points X.XX% quarter Slide for and I investment investment X.XX% reflected Past the investment from and a at in from at down up prior held while for $XX.X for As loans sound in points at came percentage total loans points for total in coming for of $X.X X loans quarter to coming up pleased QX the basis as while quarter the quarter. held levels. Nonperforming increased up be X.XX% am historically credit XX, report prior metrics continue to

The $X.X CRE X loans contributing million. also million in placed XX the of primarily contributing levels million X $X.X was levels. be increase $XX.X driven borrowers during continued to nonperforming classified quarter, being historically acceptable The both within and C&I and nonaccrual relationships nonperforming by on current including borrowers

quarter one X.XX% X.XX% agreed-upon loan $X.X relationship, totaled recoveries note, applied Of prior during for an in and one per in QX. charge-offs compared quarter the against part for the $X.X same to of Net of another we from benefited from loan million recoveries relationship. million workout plan as

charge-offs respectively, and recoveries adjusted charge-offs impact million, to million $X.X no and such, with As for net be would quarter. $X.X the

continues our with expectations. to Our level in line of charge-offs be

credit of $XX.X to in from of X.XX% prior the percentage resulting the change quarter Net allowance loans slight for quarter, investments. for losses our to X.XX%. to X.XX% reflected ratio a increased from percentage from a slight the prior quarter a For mortgage million warehouse, as held total from $X.X our also X.XX% million, change percentage reserve

as economic dollar to the The increase balancing in level the allowances reserve credit sound reserve The the for with the in headwinds. metrics the mirrors attributed loan continued nonperforming our increase well the of by loans. as quarter driven required ongoing our growth was stable of

the Slide we on office On our additional updated information portfolio. have CRE XX,

of $X.X no was classifieds, charge-offs. XX.X%. portfolio average past continues no our performance. of size service segment totaled was had nonperforming dues, average debt loan X.XXx This while strong Weighted $XXX.X We no an million. loan-to-value this no end, quarter coverage of only million financial and average sector with As weighted its

our while relationship constant normalization on our summary, its performance metrics, focus in driven experiencing In our overall banking. are we credit portfolio sound continues by

Wally. over to it I'll now turn

William Wallace

morning, good and everyone. Jim, Thanks,

basis, Turning QX to grew securities our MSR the during reported after the financial earnings with of highlights. Total excluding were In during an EPS $X.XX loss also sold quarter. Starting share per and deposits. $XXX,XXX gain a sale $XXX,XXX On QX, we adjusted the a on quarter. deposits X.X% diluted $X.XX. on of

last growth. grew is Excluding in with X.X% line brokered, deposits which quarter's X.X%,

of the quarters, shift this it We we over some continue mix couple accounts We we continued next of is our into to above but interest-bearing that currently trend noninterest-bearing to remain XX%. believe noninterest-bearing deposit forecast to deposits see still stabilizing. pressure forecast a

will easing, pressures Notably, we which remain net forecasts. expect a margin while stabilizing exist, are interest in factor pricing still our they

Gross quarter. loans X.X% investment held the grew during for

but mortgage funding, should year large which in our grew Excluding was driven loans growth expectations the progresses. warehouse, by projects X.X%. construction above as abate part This was

loan ex continue was growth deposit we year, the for essentially to digits than mid-single the greater brokered, While with matching. deposit in expect growth loan growth growth

margin flat basis interest Net at our in minus or line with was for X.XX%, plus the guidance point. quarter X of

our on up should basis Moving interest-bearing benefits. cuts, progresses anticipate slightly with expansion interest the net point these a forward, margin deposit asset to X to even X, offset rate repricing for momentum X building assuming year deposits. enough benefits are to to We flat due be beta believe as XX Fed we margin non-indexed

we with a where can X% reminder, we full a Fed at is environment above easing, expect run As business our net a the X.X%. in an over interest still target margin cycle longer-term

Shifting to $XX.X We QX. noninterest million income. in reported

million sale $X.X $XX.X our was QX, MSR million sold. mentioned million securities from the in gain previously and Excluding income which MSR our $X.X and QX, loss on our $XXX,XXX a a noninterest loss of sold, securities of excluded in adjusted $XXX,XXX on up million on $XX.X write-down

mortgage strength Seasonal increase. production business drivers and insurance segment of in the were in our our increased primary this

course in a decreased QX items million benefited $X.X while in roughly QX. Our in from net nonrecurring the The in $XX.X nature. of business, $XX.X in are by noninterest expense million million quarter normal that, to of

while As in expense to the remain such, laser-focused continue levels, we XXXX. mid-single-digit to we expect growth XXXX operating compared managing in our expense range on

ratio to to holding investor bank remain capital calculations. Furthermore, X.X%. capitalized Turning if at in AOCI our on of the even we flat that regulatory to remained of company QX, QX and our capital. XX loss in all our the note as both presentation, level TCE above levels at well above We levels were ending shown include considered X% our Slide

our we future have deployment of take remain drive to such, shareholders. that potential capital we advantage confident capital for any As flexibility value opportunities the to

With that, turn Drake. I will back now to it

Drake Mills

Wally. company momentum like the and our Thanks, I building. is energy

We and a acknowledge a to proud whose pointed that our we may our achieving customers, but have and production be we shareholders management our the that are that company industry, plan We also are financial the have of. of teams towards and any overcome efforts face built and community of goal can focused acknowledge employees, challenges high-performing challenges on our Our culture goal. experience client within institution being unmatched. remain

Thank We'll up you call. it the open for questions. for being on

Operator

Instructions]. [Operator

first Stephens. comes from question from Our Matt

Matt Olney

what understand that will fees. sure the of loans what within of without the a idea I want mortgage that the to quarters? mortgage And trying the Just servicing include MSR the better and origination impact I sale. the it from I of mortgage income sale item, just line assume make now volatility. could that Is looked get like last color few over line any now like right? that's on look to

William Wallace

Yes. Thanks, Matt.

the of from was an at due business that that was we time, servicing sold reason our while very because So site quarter-to-quarter the it in to profitability, volatile hedging that ran the stream. basis, it on We volatility earnings MSR. don't like underlying over

the that was decision so sell really And asset. the to what drove

cycle quarter, kind back the numbers back, we in rate. now you is breakeven mortgage think anticipate there way now, anticipation whatever breakeven revenue running $X the rightsize with bank that be in of with to a give and right a the we'll running mortgage in run just than run which the $X.X over rather at comes So some business end back we year, the and business don't and million rates mortgage the made volume last breakeven that running our say the at accept which half, per of to community acceptable for would point is this be model, rate. We in the we changes come when looking will we're why a really million

of So anticipate sale we out anticipated quarter. guidance. on business take $XXX,XXX the $XXX,XXX we in we'd or this our But a expense side, would about the

we're So your reduce you where encouraging were expenses you not to before. from

Matt Olney

few ask levels year. I Perfect. the also Okay. a quarters nice capital last the over to And of last just overall seeing about over wanted build capital. We're

restructuring, a think flexibility. love that to now I updated CETX something. of give is just how like Would thoughts XX%. get thinking buybacks. about you ratio would lot securities would you're a capital, seems do of It lot more think you to your flexibility on to deployment have M&A, close I that

are. of what your Just thoughts curious kind

Drake Mills

you, Thank Drake. Matt.

do. awesome we Alabama and Florida the For able and together team have announced South Panhandle really we an been into start expectations. they're expansion the to our of high to us, year in and What really with just going the early their pleased business their what put and -- we've

So that. we have

to us. we starting back side deposit have We get momentum into that look at certainly, also our deposit, things are for the numbers historical you on going as to teams creating think we -- as growth on focused we feel that can see some been 'XX and

opportunities $XX on see focus. for allows this think a with back that of important relationships who look base our take those as us. as you and do And business care as that and we performance, as -- is a I get internally to an say, we if on to going certainly billion of you start to to you we at to to And are focus with profitability are focus today There's and what and that cross over do? are and point thought to multiple opportunities pressure asset multiples, get have those the we we be return that as we going we

expense worked to $XX we've cross up complete the to start as build hard side the billion. So over we on buildup internally or really

So we be billion to expect. performance to understand fairly get quickly we number we to able that need recognize $XX that to

that's and not have mind use in our use front M&A our through ability through markets, in So seeing would we of capital think I growth come that certainly expansion focus that's Where this way. we to plus going what to some moment, that right M&A to activity. capital that Texas on like are to

Matt Olney

Okay. just And lastly the on deposit me then for cost.

bps the up were think interest-bearing quarter. costs I deposit XX this

are as deposit I costs other think commentary your can expectations here? recent some included far levels. as more you easing but additional on what pressure, from Any add the color from

Martin Hall

Yes, this Lance. is

of We self-fund of we're our I going presidents. which sure could some of is markets to XXXX. to going it in. think that to challenged in growth it markets is timing, and I'm really be the be you of some make seeing all our proud

the competition that's higher of saw little and reasons Dallas is and majority where growth. tougher in one of we of our bit the a So between Houston, cost

XX what still than Some of advantage interest-bearing in Texas. see where about that in is able We're we lower get North bps Louisiana. Louisiana, in to competitive on are a North seasonal we're based deposits, at seeing we

for that's great us. So

But a But short warehouse. feels excluding I would deposit there's it Wally's has the commentary, maintaining is we market in costs. for more to long-term normalizing and a like little receptive agree with mortgage us, sub-XX% franchise being that value ratios, feel loan-to-deposit

job a offset a deposits reduction to done to number grow ability one. pricing, think continuing not maintain is with we and we'll bit liquidity, grow loan disciplined of NIM continuing So continue go forward. to our job we've expansion in actually, to as and see The is little really good potentially see NIM. And we

deposit doing. our of and I'm what proud off, paying franchise is we're So

Matt Olney

Congrats on quarter. the

Operator

question from next James. Raymond Michael from Our comes

Michael Rose

this off start growth. deposit to wanted on Just loan quarter's and

on driving talked fund over look growth annualized. What's I expect projected big the driver than X%, to just be looked deposit to ups you guidance. higher is given loan less just ex we this matching Is of before, know essentially if So at then the you start, a annualized and warehouse, the a quarter? side, slowdown? was little guys which double-digit guided growth? stronger loans, should you which deposit reiterating I construction what And it the then about

Martin Hall

opportunities. process, loan of where my Texas really good continue This job, a believe is lot few us, that. such done in is look opinion, that the competitive our There accurate customers. we've is Yes. growth that's I no we a Thanks client is No, years advantage and in to still it. we Lance. the way some at onboarding for really the question selection still to last through see think guidance for a good

of construction we but bit opportunity, on increase on smart in in normal because growth a funding quicker about. sense the that what in But a great to projects X bit we bankers because be. to It's our was strategic have we thought subnormal we of like disciplined little strongly a to Texas, to was have we of that growth. than locations, we're some lines up and had some going in really C&I created by more really feel funding We of of we continue also, govern and our going benefited our balance loan this feel utilization it for us little which little that usage, ways. One QX a was a the deposit from the bit

So that's making us it sure can the driver for fund in way. is the that appropriate we

Michael Rose

Very helpful. And then maybe for Wally.

expect any cuts the this could did don't year last points, pressure. XXX the I you Just margin, back you for looking at X the XX now I points can your we to higher. cuts, basis And margin the said grind get from But were expectation think around basis you see, least go if of first quarter, to think if XX you X comments to is assuming cuts. NIM at I

be So us in your it's changed Can this walk betas, up. nice cetera? seems step what's a et modeling, to deposit you just assumptions, growth whether through maybe

William Wallace

Yes. cuts. models. expectations our it changed in we own over like it since just their that changing one are, We people constantly, in going relates all what as are commentary model our to Fed actually expectations know put put in to one, seems The the any and don't two, place; Thanks. We haven't cut provide I forecast.

could X were we still X margin we to and maybe cuts Fed think expansion that see offset cut. if So the

The -- were as higher we anticipated. model, expectations as our bit deposit cost takes the our than puts a little and far in had

about yields asked how to our better conscious in our coming been their and have we loan have they loans, than also be expectations. markets point, our price Lance's to very seeing However, we're

margin net-net, we performing been the as has anticipated. So had

expectations really our takes haven't puts some in there's but changed. there, So and

Operator

KBW. Our from Woody next from question comes

Wood Lay

beginning but in opening sounded just Wanted on monthly the of noninterest-bearing can noninterest-bearing you that trends below this give like in pretty It any to your and out looks the seeing comments, segment? deposits. color you is with you're remix start sort optimistic

William Wallace

For of we'd where at Fed the a kind meaningful rates noninterest-bearing last expectation time time the portfolio, We shift where X are last a quarters, a last we've in our see an near our a of mix. been done was period went the back we building we seen study today have funds looked and that had tightening. we and

has we to pretty change that low in moved mix see Our deterioration the start exactly of or The that as XX% stabilize have that the consistently expectations we would mix been kind range. expected. in

However, every bit we better quarter, it's a done than modeling. were little

still mix in that we bottom anticipating X.X%. will range. modeling this around the low see quarter were XX% to pleased at we're We come that and XX right And XX%. -- closer to were So in it

like that just is of we're seeing deposit So trend rate the stabilizing costs the it stabilization increasing. of and change we're seeing our

we're trends the our helps confidence seeing increased in that forecasts. question. own that answer guess, some, your So I give Hopefully, us

Wood Lay

mortgage Yes, the warehouse? that's you funding about how the could warehouse what then remind higher deposits? brokered helpful. Was just the quarter, in me part of the increase the And the you think reason in drove

William Wallace

Yes.

mortgage is funding our disposal So yes, with wholesale the is whatever the cheapest. and Woody, as will warehouse we fund at

of is use brokered shift more that business. improves now, funding right the relative then funding would the FHLB. we So market optimal But FHLB broker, to if to

worth now, to how that price mortgage of fund business we quickly. well. it a actually though, business, us did with and we is can last our sub target today. most customers And that profitable us loan-to-deposit on our the so it's work we for a and XXs ratio, very turned right or it we and It's working year just wholesale, that's because lot with strong business but note, business profitable Also important warehouse noting that as

Wood Lay

I touch last for wanted expenses. All right. to Then me. on

of quarter. opening nonrecurring comments, in of your in you out think called million sort items the I $X

on sort what Just of items were? any give you can those color

William Wallace

a that handful just a recovery. related -- had accrual we a handful happened a had happen from of quarter. an There to just things them to we quarter-to-quarter Look, this and reversal Yes. of legal of recovery. fraud and year-to-year, a incentives. We there's was had We have

of And combination so it things $X.X little lot of up -- a kind it added million. just to that was a about of

I rate growth off of quarter half your rate wouldn't about and the at think think growth as look kind in your use expectations quarter I run So your you for about that of still would first the base that. back year. of model, the fourth as

and took fourth our our So third kept quarter forecast we the and second, same.

by with. Our full $X.X came exceeded million expectations that year down we that our

Operator

next at comes from our question Manuel Davidson. D.A. And

Manuel Navas

covered kind that out but towards taking expenses. on doesn't lean think guidance. my going to sounds at onetime works really I of I question you're guide, come just right it the expense like -- it -- in was end it low way take Is change And to the could this? items. the the that these you you out of it

William Wallace

want use X we're year. point. our were quarter, expectations guidance appropriate quarter to drop in Manuel, with exuberant and get and into We pleased think of have the we low the the the Yes, management over the to that that is at range. first expense but end We still this don't gave we

Manuel Navas

really and this deal, expand loan mean, a loan getting growth pushing comments you're on at it better across out can't on development but any I be your strong, yield of big that get loan issues the competitively? Is that better to on you year. so a just working that how thoughts of kind is pricing -- Could still just point? that is loan And yields bit yields? little you're

Martin Hall

their is message portfolio what markets, in deposit that their really take got the our and focus is core credit of Yes. understand plan, goal strategic think understanding of Lance. we've clearly through cycle This is the sort some a I from dynamic clients, grow is what sort banking on running which minimal is presidents kind understanding really the margin. just where Again, perspective, primary risk now, of very and right

there targeted, very that's now. growth sake inside right for origin is going very growth of on focused. so no And It's

also growth we as growth govern governing yield. through so with we are liquidity, And

the because hat's our presidents message to bankers. they And that understood to my so have off clearly carried and

of opportunity great to lot I of a so lot There's keep And again, that There's demand. Texas it, projects. creates us. back a for going

continues the other which create our corporate in us footprint, clients probably our banks pricing. and migration disciplined on to of luxury our allowing that, us of because deck, marketplace highlighted into that the for have we is to consumers more of opportunity be loan investor As don't

Operator

Instructions] next from follow-up [Operator Matt is Stephens. a Our from question

Matt Olney

that And the you a to bank has strong earlier growth momentum more Drake, once I that desire the the to there's numbers you side. historical the that have return mentioned you XXXX appreciate to is XXXX. on start that but of still growth growth historical organic in us about realistic bank get at been away, hired teams ways remind think just And to a what's numbers. kind how grow as as XXXX? you new -- you've

Drake Mills

Thank you, our We at to us that's infrastructure. we capital grow and have build current Matt. that. And per growth philosophy, like we think -- to levels from teams year, everything XX% is feel capital built for Realistic us growth is the our do we year. XX% a -- averaging we and allow

off, why we first could opportunities that and we expansion just everything think that, the to our their people -- that made we matched decision, else. and if the So those exceptional culture culture return team,

So apply Houston. we XX% in historical X%, to in then that if and you and and saw Florida XX% we go same see opportunities ability markets, growth South our Panhandle into that X% going and into rates to Texas XX% in Alabama and the

we sets up to to growth us competitive that believe industry, funding to and to at think be back well in able that look those where certainly we drive as could the coming return liquidity I some and if be rates come rate. see opportunities to XX% a So and down, I

had even look XX% opportunity. at you we pipeline would a If with current looked did, slight We in the at if we clip we be at everything 'XX, growing slowdown, XXXX, let's funding a way say, today. that opportunities,

getting to forward infrastructure. numbers, look back to those we the have certainly I So but

running are about teams capacity. Our XX%, XX% maybe

capacity we able a that. to have accomplish be So to internally lot of

Matt Olney

Drake, mid-single-digit think year And there, guidance that level deposit and that growth loan about for I the talked we this still earlier. just following up

the I impact newer not time from right? for that on Is include any where last your you benefits did Is said January in the this that -- expectation from still XXXX? that or think team. call

Drake Mills

Exactly. Matt. correct, is That

Operator

Ladies any it Drake question-and-answer gentlemen, and pass for concludes session. I'll Mills remarks. the now to back this additional

Drake Mills

Thank that call on and the performance. on we performance we very today, But you have for but momentum. understand we being slowing quarter, much a recognize good had and that's where pleased so we still to without we focus are

team's I move talking look performance, as And forward I go Matt, stronger with just as to, into with I'm was and pleased we 'XX. the focus growth on

Our expansion has in our for start to South Alabama we the capital been earn we Panhandle But and off. cost that plus. to Florida recognize of us do have exceptional

on So And of right performance. it's the the truly is internally type focus on performance.

to prepare we As to ourselves position able plus. going in that to be of we're be $XXB, at be I we're capital level point, to to think across over cost a when get and perform we prepared, going a that provides

if And I and any to in in future. I for everyone's questions, on you spend with time anyone has the seeing we're being forward other the today. open look appreciate to appreciate us comments. everyone's today call opportunity confidence you

Operator

concludes this today's gentlemen, and Ladies Inc. Origin Bancorp,

Conference a Call. great Thank Earnings First and Quarter day. you, have

Origin Bancorp (OBK) 25 Apr 242024 Q1 Earnings call transcript