On Tuesday, DA Davidson adjusted the stock price target for Origin Bancorp (NYSE:OBK) to $38.00, down from the previous $41.00, while keeping a Buy rating on the stock. The firm's analysis recognized Origin Bancorp's core pre-provision net revenue (PPNR) outperformance, which was driven by stronger fees and operational expenditures, but was partially counterbalanced by a decrease in net interest income (NII).
Despite the positive deposit growth, which saw a 9% increase excluding brokered deposits, the company experienced flat loan balances and a disappointing net interest margin (NIM). Moreover, there was a noted increase in net charge-offs (NCOs), rising to 49 basis points.
The firm cited no new questionable banker activity but expressed concerns over a weaker NIM and NII, leading to a lowered earnings estimate for 2025. However, the anticipated January 2025 disclosure of efficiency targets could present an opportunity for improved returns.
Prior to the earnings report, Origin Bancorp's shares had already declined by 16% year-to-date compared to the KRX index and saw an additional 3% drop following the revised 2025 earnings estimate.
Despite recent performance, DA Davidson highlighted an attractive entry point for investors, with Origin Bancorp's shares trading at a tangible book value (TBV) multiple of 1.0x, which is lower than the 1.6x average of its KRX peers. The firm's analysis suggests that the bank's significant presence in the Texas market, where over 70% of its loans are concentrated, positions it favorably.
The firm reiterated a Buy rating for Origin Bancorp, pointing to a potential 21% upside to the newly set price target, suggesting confidence in the stock's future performance despite current challenges.
In other recent news, Origin Bancorp recently appointed Cecil Jones, a seasoned financial professional, to its Board of Directors. This addition comes as the company reports significant asset growth from $4.2 billion at its public inception in 2018 to nearly $10 billion.
The company's third-quarter earnings showed a 2.3% increase in total deposits and a rise in non-interest-bearing deposits by 1.5%. Furthermore, the company's loan portfolio health has shown improvement, with a decrease in past dues to 0.49% and nonperforming loans to 0.81%.
Analysts from Stephens have revised their stock price target for Origin Bancorp to $38.00, maintaining an overweight rating. This adjustment comes in recognition of the company's effective cost management and core loan yield growth. Despite a third-quarter miss in net interest income and margin due to higher deposit costs, Stephens remains positive about Origin Bancorp's future profitability.
Looking ahead, Origin Bancorp aims to improve profitability by the end of 2024, with a detailed plan set to be unveiled in January. These recent developments reflect Origin Bancorp's strategic initiatives and ongoing efforts to optimize its financial performance.
InvestingPro Insights
Recent InvestingPro data provides additional context to DA Davidson's analysis of Origin Bancorp (NYSE:OBK). The company's P/E ratio stands at 12.82, while its price-to-book ratio is 0.85, aligning with DA Davidson's observation of the stock trading at an attractive valuation relative to its peers. This valuation perspective is further supported by an InvestingPro Tip indicating that OBK has been profitable over the last twelve months.
Despite the challenges noted in the article, OBK has demonstrated a commitment to shareholder returns, with an InvestingPro Tip highlighting that the company has raised its dividend for 6 consecutive years. The current dividend yield is 1.93%, which may appeal to income-focused investors.
However, investors should note that 4 analysts have revised their earnings downwards for the upcoming period, according to another InvestingPro Tip. This aligns with DA Davidson's lowered earnings estimate for 2025 and the concerns over weaker NIM and NII mentioned in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Origin Bancorp, providing a deeper dive into the company's financial health and market position.
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