Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, subordinated debt rating of BBB-, and short-term debt rating of K3 for Ruston, Louisiana based Origin Bancorp, Inc. (NASDAQ: OBNK) (Origin, or the Company). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 for its subsidiary, Origin Bank. The Outlook for all long-term ratings is Stable.
The ratings are supported by Origins improved operating performance for 2018 with ROA near 1.2%. Also supporting the ratings are OBNKs deposit composition, which includes a favorable level of noninterest-bearing deposits “ resulting in relatively stable funding costs and allowing for NIM expansion (>3.8%) in recent years. The ratings also reflect the Companys strong capital position following its IPO. However, Origin is expected to deploy its excess capital, though intends to maintain relatively conservative capital ratios in line with prior years (Tier 1 leverage in the 10% range). OBNKs ratings are constrained by its weak earnings in recent years, mainly due to the volatility in asset quality metrics stemming from its energy portfolio. However, that portfolio has since been cleaned up and the overall exposure has receded. The ratings are further constrained by a comparatively high efficiency ratio due to inefficiencies within its mortgage banking division, which has been in a net loss position. The efficiency ratio has improved in 2018 to be more in line with rated peers, and KBRA believes that Origin has the opportunity to additionally improve operating efficiency through further growth/leverage of its infrastructure and mortgage banking reorganization efforts.
The ratings are based on KBRAs Global Bank and Bank Holding Company Rating Methodology published on February 19, 2016.
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About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
Rempe, Senior Analyst
Arscott, Senior Director