Origin Bancorp, Inc. Q3 FY2025 earnings call

Key Points

• Drake Mills discussed the Tricolor charge-off, emphasizing using the event to improve policies and processes, with anticipation of recoveries through collections, insurance, and legal means.
• Lance Hall highlighted Optimize Origin progress: pretax pre-provision ROA increased 48 basis points to 1.63% in Q3 2025, NIM expanded 48 basis points, total revenue up 10%, noninterest expense down 3%, loan originations up 19.2% YTD. Treasury management fee income up 7% Y/Y, loan and swap fees up 62% Y/Y.
• Jim Crotwell detailed the Tricolor charge-off ($28.4 million), credit metrics (net charge-offs, past due loans, classified loans), allowance for credit losses (increased to 1.35% net of mortgage warehouse), and ample capacity in ADC and CRE segments.
• Wally Wallace provided financial highlights: diluted EPS $0.27, pretax pre-provision earnings, balance sheet changes (loans down 1.9% Q/Q, deposits up 2.6% Q/Q), NIM guidance, noninterest expense guidance, and capital details (tangible book value growth, TCE ratio 10.9%, share repurchases).

Loan production: Business loan production under $2.5 million across the footprint was up 22.9% year-to-date. For product segments, ADC had funding to total risk-based capital of 47% and CRE had 235%. Noninterest-bearing deposits grew 8.6% quarter-over-quarter to $158.6 million, representing 24% of total deposits.

Forward-Looking Statements

• Loan growth: Revised from up low single digits to flat for the year.
• Deposit growth: Maintained low single digits.
• NIM: Tightened to 3.65% in Q4 2025 and 3.60% for the full year, plus or minus 3 basis points.
• Noninterest expense: Maintaining guidance for Q4, lowering full year guidance to down low single digits.

Risks

• Tricolor fraud: Charge-off of $28.4 million, with uncertain recovery timing and magnitude due to bankruptcy proceedings.
• Credit process enhancements: Potential future investments in credit management and audit processes, but no immediate impact to expense run rate anticipated.

Q: Matt with Stephens asked about NBFI exposure and subprime credits.

A: Jim Crotwell responded that subprime portfolio was ~$92 million (1.2% of total loans), with subprime auto at 0.2% of total portfolio, 2 performing relationships. NBFI exposure ~5% of total loans, 61% real estate related, no past dues or performing loans in NBFI segment.

Q: Matt asked about Tricolor insurance offsetting charge-offs.

A: Drake Mills stated they are aggressively pursuing recovery but uncertain on timing and amount of recoveries.

Q: Woody with KBW asked about expense impact from credit process enhancements.

A: Drake Mills said no significant impact expected, with an executive to build a team for enhanced credit management and collateral protection.

Q: Woody asked about indirect exposure to Tricolor.

A: Drake Mills mentioned ~$500,000 in mortgages with a performing executive, confident all exposure addressed.

Q: Evan with Raymond James asked about Optimize Origin and capital deployment.

A: Martin Hall said Optimize is ongoing, with continuous process improvement and strategic planning; Wally Wallace stated organic balance sheet growth is priority #1, with stock buybacks and M&A as potential deployment options.

Q: Matt with Stephens asked about fixed loan repricing.

A: Wally Wallace said remaining benefits from fixed loan repricing exist but some pulled forward, still over $300 million of loans with planned payoffs in 2026.

Q: Matt asked about fee income guidance.

A: Wally Wallace clarified fee income base after excluding notable items, with fourth quarter seasonally light but year-over-year growth expected.