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Origin Bank(OBK) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) The company presents its unaudited consolidated financial statements for the period ending September 30, 2024, noting the negative impact of a former banker's suspicious activity | Key Financial Metrics | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $9.97 billion | $9.72 billion | | Net Loans | $7.86 billion | $7.56 billion | | Total Deposits | $8.49 billion | $8.25 billion | | Total Liabilities | $8.82 billion | $8.66 billion | | Total Stockholders' Equity | $1.15 billion | $1.06 billion | | Key Income Statement Items | Q3 2024 | Q3 2023 | First Nine Months 2024 | First Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $74.8 million | $74.1 million | $222.0 million | $226.6 million | | Net Income | $18.6 million | $24.3 million | $62.2 million | $70.4 million | | Diluted EPS | $0.60 | $0.79 | $2.00 | $2.28 | Consolidated Balance Sheets Total assets grew to $9.97 billion driven by loan growth, while total liabilities increased due to higher deposits | Balance Sheet Items (in thousands of USD) | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total cash and cash equivalents | 321,191 | 280,441 | | Total securities | 1,178,594 | 1,272,054 | | Net loans | 7,860,801 | 7,564,076 | | Total Assets | 9,965,986 | 9,722,584 | | Liabilities and Stockholders' Equity | | | | Total deposits | 8,486,568 | 8,251,125 | | FHLB advances and other borrowings | 30,446 | 83,598 | | Total Liabilities | 8,820,313 | 8,659,679 | | Total Stockholders' Equity | 1,145,673 | 1,062,905 | Consolidated Statements of Income Q3 2024 net income was $18.6 million, down from $24.3 million in Q3 2023, due to higher interest and non-interest expenses | Income Statement Items (in thousands of USD) | Q3 2024 | Q3 2023 | First Nine Months 2024 | First Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | 74,804 | 74,130 | 222,017 | 226,568 | | Provision for credit losses | 4,603 | 3,515 | 12,846 | 14,018 | | Non-interest income | 15,989 | 18,119 | 55,709 | 50,139 | | Non-interest expense | 62,521 | 58,663 | 185,616 | 174,310 | | Net Income | 18,601 | 24,313 | 62,222 | 70,375 | | Diluted Earnings Per Share | $0.60 | $0.79 | $2.00 | $2.28 | Consolidated Statements of Comprehensive Income (Loss) Q3 2024 comprehensive income was $51.5 million, significantly higher than Q3 2023 due to positive changes in unrealized gains on securities | Comprehensive Income Items (in thousands of USD) | Q3 2024 | Q3 2023 | First Nine Months 2024 | First Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income | 18,601 | 24,313 | 62,222 | 70,375 | | Other comprehensive income (loss), net of tax | 32,939 | (19,850) | 26,778 | (12,854) | | Comprehensive Income | 51,540 | 4,463 | 89,000 | 57,521 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $1.15 billion as of September 30, 2024, driven by net income and other comprehensive income | Changes in Stockholders' Equity (in thousands of USD) - First Nine Months 2024 | Amount | | :--- | :--- | | Balance at January 1, 2024 | 1,062,905 | | Net income | 62,232 | | Other comprehensive income (loss), net of tax | 26,778 | | Dividends declared | (14,222) | | Stock-based compensation and other | 7,990 | | Balance at September 30, 2024 | 1,145,673 | Consolidated Statements of Cash Flows For the first nine months of 2024, net cash from operations was $78.6 million, while net cash used in investing was $172.7 million | Cash Flow Items (in thousands of USD) | First Nine Months 2024 | First Nine Months 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | 78,606 | 100,475 | | Net cash used in investing activities | (172,695) | (132,772) | | Net cash provided by (used in) financing activities | 134,839 | (21,397) | | Net increase (decrease) in cash and cash equivalents | 40,750 | (53,694) | Condensed Notes to Consolidated Financial Statements The notes provide details on accounting policies and financial items, including a significant disclosure on a former banker's suspicious activity - In Note 4 (Loans), total loans held for investment (LHFI) were $7.96 billion as of September 30, 2024, with high concentrations in commercial real estate and C&I loans63 - In Note 11 (Capital), the company and its bank subsidiary met all capital adequacy requirements and were classified as "well capitalized" as of September 30, 2024176177 - In Note 12 (Commitments and Contingencies), the company disclosed suspicious activity by a former banker, resulting in a $7.3 million provision for loan losses and $2.3 million in related expenses191192193 Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial condition and results for Q3 and the first nine months of 2024, highlighting the impact of a former banker's suspicious activity - Q3 2024 net income was $18.6 million ($0.60 per share), down from $24.3 million ($0.79 per share) in Q3 2023205 - Loans held for investment (LHFI) grew 3.9% to $7.96 billion and total deposits grew 2.9% to $8.49 billion since year-end 2023201202 - The suspicious activity of a former banker negatively impacted diluted EPS by $0.27 for the first nine months of 2024206 Results of Operations Q3 2024 net interest income was $74.8 million, as loan interest income growth was offset by higher deposit and non-interest expenses | Comparison of Results of Operations (in thousands of USD) | Q3 2024 | Q3 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Net interest income | 74,804 | 74,130 | 0.9% | | Provision for credit losses | 4,603 | 3,515 | 31.0% | | Non-interest income | 15,989 | 18,119 | (11.8)% | | Non-interest expense | 62,521 | 58,663 | 6.6% | - Net interest margin (FTE) slightly increased to 3.18% in Q3 2024 from 3.14% in Q3 2023, due to a higher mix of high-yield loans211 Comparison of Financial Condition Total assets grew 2.5% to $9.97 billion, driven by a 3.9% increase in loans, while nonperforming assets rose significantly due to a former banker's activities | Financial Condition Items (in millions of USD) | September 30, 2024 | December 31, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | 9,966 | 9,723 | 2.5% | | Loans Held for Investment (LHFI) | 7,957 | 7,661 | 3.9% | | Total Deposits | 8,487 | 8,251 | 2.9% | | Nonperforming LHFI | 64.3 | 30.1 | 113.6% | - The allowance for loan losses to nonperforming loans coverage ratio decreased to 149.35% from 321.66% at year-end 2023 due to the sharp increase in nonperforming loans282 Liquidity and Capital Resources The company maintains a strong liquidity position with core deposits as its primary funding source and all capital ratios exceeding "well capitalized" levels | Regulatory Capital Ratios (%) | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Origin Bancorp, Inc. | | | | Common equity Tier 1 capital ratio | 12.46 | 11.83 | | Tier 1 leverage ratio | 10.93 | 10.50 | | Total capital ratio | 15.45 | 15.02 | | Origin Bank | | | | Common equity Tier 1 capital ratio | 12.43 | 11.95 | - As of September 30, 2024, the company had substantial contingent liquidity, including $2.11 billion from the FHLB and $1.40 billion from the Federal Reserve's discount window297307 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuation, which is managed through simulation modeling and shows an asset-sensitive balance sheet | Interest Rate Change (Basis Points) | Change in Net Interest Income (%) | Change in Economic Value of Equity (%) | | :--- | :--- | :--- | | +400 | 12.8 | (13.1) | | +200 | 6.6 | (6.3) | | +100 | 3.3 | (3.0) | | -100 | (3.9) | 3.0 | | -200 | (6.0) | 6.1 | - The company's primary market risk is interest rate volatility, which is overseen by the Asset Liability Management Committee315317 Controls and Procedures Management concluded that disclosure controls and procedures were effective, and has enhanced internal controls in response to the former banker's activities - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period326 - The company has strengthened internal controls to mitigate risks similar to the recently discovered suspicious activities of a former banker327 Part II - OTHER INFORMATION Legal Proceedings This section refers to Note 12 of the financial statements for details on legal proceedings, mainly concerning contingent losses from a former banker's activities - For details on legal proceedings, the report refers to the disclosure in Note 12 regarding contingent losses from a former banker's suspicious activities329 Risk Factors The company states there have been no material changes to the risk factors disclosed in its 2023 Form 10-K - There were no material changes during the reporting period to the risk factors previously disclosed in the company's 2023 Form 10-K330 Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities The company did not repurchase any shares during the quarter under its authorized $50 million stock repurchase program - The company authorized a $50 million stock repurchase program in July 2022331 - No stock repurchases were made during the quarter ended September 30, 2024332 Other Items Items 3 and 4 are not applicable, and no new Rule 10b5-1 trading arrangements were adopted by directors or officers during the quarter - Item 3 (Defaults Upon Senior Securities) and Item 4 (Mine Safety Disclosures) are not applicable333 - No director or executive officer adopted, terminated, or modified a Rule 10b5-1 trading arrangement during Q3 2024333