Origin Bancorp, Inc. Q4 FY2025 earnings call

1. Optimize Origin was initiated last year, and the short-term goal of achieving a 1% or greater ROA run rate by Q4 2025 was accomplished. 2. In 2025, NII was up 10.2%, total revenue (excluding notables) was up 8.8%, and noninterest expense (excluding notables) was down 0.7%. Loan originations increased 37% year-over-year and loan and swap fees grew 57%. 3. In 2026, focus is on the client delivery model and additional revenue growth opportunities, capitalizing on M&A-driven market disruption by adding over 10 production bankers in Houston and Dallas-Fort Worth and planning to invest roughly $10 million in new bankers and banking teams. 4. Credit metrics were sound with past dues at year-end at 0.96% of total loans, net charge-offs of $3.2 million in line with expectations, nonperforming assets reduced by ~$7 million, and the allowance for credit losses increased due to loan growth while remaining stable as a percentage of total loans.

In Q4, diluted earnings per share were $0.95, and net income was $29.5 million, driving a run rate return on average assets of 1.19%. NII was up 10.2%. Total revenue, excluding notable items, was up 8.8% and noninterest expense, excluding notables, was down 0.7%. Loan originations increased approximately $500 million or 37% year-over-year and loan and swap fees increased 57% over the same period. Loans grew 1.8% sequentially and 1.1% when excluding mortgage warehouse. Total deposits declined 0.3% during the quarter, but excluding the sale of $215 million in interest-bearing deposits on the last day of the year, deposits would have increased 2.3%. Net interest margin expanded 8 basis points during the quarter to 3.73%. Noninterest income was $16.7 million in Q4, excluding notable items, it declined from $17.1 million to $16.3 million. Noninterest expense was $62.8 million in Q4, excluding notable items, it increased from $61.1 million to $61.5 million. The allowance for credit losses increased $523,000 to $96.8 million, remaining stable at 1.34% of total loans net of mortgage warehouse. Nonperforming assets declined from 1.18% to 1.07% at year-end, a reduction of approximately $7 million. Total classifieds increased from 1.84% to 1.92% of total loans.

1. Expect slight margin compression in Q1 due to timing differences in loan versus deposit repricing following recent Fed rate cuts, but anticipate NIM in the 3.70% to 3.80% range by Q4 with a current bias to the higher end. 2. Expect net interest income growth in the mid- to high single digits for both the full year and Q4 over Q4. 3. Anticipate full year noninterest income growth in the mid- to high single digits with Q4 over Q4 growth in the low to mid-single digits when excluding notable items. 4. Expect noninterest expense growth in the mid-single digits (excluding notable items) for the full year and Q4 over Q4. 5. Expect a run rate ROA of at least 1.15% in Q4 and a pretax pre-provision run rate ROA in excess of 1.72%.

1. Intense market competition which may put pressure on loan and deposit spreads. 2. Potential difficulty in further reducing deposit costs although there is still opportunity. 3. Credit risks such as the slight increase in total classifieds driven by the downgrade of some relationships. 4. Uncertainty associated with M&A-driven market disruption which may bring additional competitive challenges.

Q: Matt from Stephens asked about the expense guidance related to the $10 million investment and its impact on loan growth guidance in 2026.

A: Martin Hall said most of the budgeted hires were back-end loaded, and Wally Wallace mentioned about the expense run rate including merit increases, cost of living adjustments, payroll taxes, and technology contract renegotiation expenses.

Q: Michael from Raymond James Financial asked about the types of lenders being hired and the pace of hiring.

A: Lance Hall said the mix includes private bankers, treasury management officers, and C&I lenders, and the pace of hiring is consistent with ongoing opportunities.

Q: Woody from KBW asked about the impact of disruption on loan competition and deposit costs.

A: Lance Hall said competition is intense but not irrational, and Martin Hall said there is still opportunity to lower deposit costs in Louisiana.

Q: Stephen from Piper Sandler asked about the earn-back period of new hires and the use of data.

A: Drake Mills said the earn-back period is 12-15 months, and Martin Hall said data is used to drive loan growth and identify target clients, which is a competitive advantage.

Q: Gary from D.A. Davidson asked about swap activity and securities portfolio.

A: An unknown executive said swap activity normalized from the high third quarter, and William Wallace said the securities portfolio is expected to remain relative to assets and there is liquidity for loan deployment.