Origin Bancorp (OBK)

Regional banking company Origin Bancorp (NYSE:OBK) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 15% year on year to $103.4 million. Its GAAP profit of $0.95 per share was 10.7% above analysts’ consensus estimates.

Company Overview

Founded in 1912 during the early boom days of Louisiana banking, Origin Bancorp (NYSE:OBK) is a financial holding company that provides personalized banking services to businesses, municipalities, and individuals across Texas, Louisiana, and Mississippi.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Origin Bancorp competes with other regional banks operating in Texas, Louisiana, and Mississippi, including Cadence Bank (NYSE:CADE), Hancock Whitney (NASDAQ:HWC), and Regions Financial (NYSE:RF), as well as national banks with significant presence in these markets like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC).

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Unfortunately, Origin Bancorp’s 9% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the banking sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Origin Bancorp’s recent performance shows its demand has slowed as its annualized revenue growth of 7.5% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Origin Bancorp reported year-on-year revenue growth of 15%, and its $103.4 million of revenue exceeded Wall Street’s estimates by 3.1%.

Net interest income made up 82.6% of the company’s total revenue during the last five years, meaning Origin Bancorp barely relies on non-interest income to drive its overall growth.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Origin Bancorp’s unimpressive 9.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Origin Bancorp, its two-year annual EPS declines of 5.9% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Origin Bancorp reported EPS of $0.95, up from $0.46 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Origin Bancorp’s full-year EPS of $2.40 to grow 52.8%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Origin Bancorp’s TBVPS grew at a decent 6% annual clip over the last five years. TBVPS growth has accelerated recently, growing by 10.5% annually over the last two years from $28.68 to $35.04 per share.

Over the next 12 months, Consensus estimates call for Origin Bancorp’s TBVPS to grow by 8% to $37.83, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Origin Bancorp has averaged a Tier 1 capital ratio of 13%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Origin Bancorp has averaged an ROE of 9.8%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We enjoyed seeing Origin Bancorp beat analysts’ revenue expectations this quarter. We were also glad its net interest income outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 3.4% to $42.13 immediately after reporting.

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Origin Bancorp isn’t a terrible business, but it doesn’t pass our quality test. First off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding net interest margin shows its loan book is becoming more profitable, the downside is its estimated sales for the next 12 months are weak. On top of that, its estimated net interest income for the next 12 months are weak.

Origin Bancorp’s P/B ratio based on the next 12 months is 0.9x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $43.40 on the company (compared to the current share price of $42.13).