Origin Bancorp’s Earnings Call: Growth Amid Challenges

Origin Bancorp, Inc. ((OBK)) has held its Q3 earnings call. Read on for the main highlights of the call.

Origin Bancorp’s recent earnings call painted a picture of both robust growth and significant challenges. The company showcased strong performance in loan originations, noninterest-bearing deposits, and treasury management fee income, alongside an improved net interest margin. However, the call also highlighted some hurdles, such as a substantial charge-off related to Tricolor, decreased loan balances, and an increase in nonperforming assets. This mix of positive momentum and notable issues reflects a balanced sentiment from the earnings call.

Increase in Loan Originations

Loan originations have seen a significant boost, rising 19.2% year-to-date compared to the same period last year. Notably, business loan production under $2.5 million surged by 22.9%, indicating a strong demand in this segment.

Expansion of Noninterest-Bearing Deposits

The company reported an impressive increase in noninterest-bearing deposits, which grew by $158.6 million or 8.6% quarter-over-quarter. This growth underscores the company’s ability to attract and retain depositors.

Improvements in Treasury Management and Loan Fees

Treasury management fee income rose by 7% year-over-year, while loan and swap fees saw a remarkable increase of 62% during the same period. These improvements highlight the company’s effective fee income strategies.

Positive Trends in Net Interest Margin

Origin Bancorp’s net interest margin expanded by 4 basis points during the quarter, reaching 3.65%. This positive trend is a testament to the company’s efficient management of interest income and expenses.

Tangible Book Value Growth

The tangible book value of the company grew sequentially to $33.95, marking the 12th consecutive quarter of growth. This consistent increase reflects the company’s strong financial health and shareholder value.

Significant Charge-off Related to Tricolor

A notable challenge for the company was the charge-off of the entire outstanding Tricolor debt, totaling $28.4 million, due to fraud allegations. This contributed to net charge-offs of $31.4 million for the third quarter.

Decrease in Loan Balances

Loan balances decreased by 1.9% sequentially and 0.6% when excluding the mortgage warehouse. This decline indicates a cautious approach to loan growth amid current market conditions.

Increased Nonperforming Assets

Nonperforming assets rose by $1.6 million, reaching 1.18% at the quarter’s end compared to 1.14% in the previous quarter. This increase highlights the need for vigilant asset management.

Classified Loans Increase

Classified loans increased by $10.7 million, with their percentage of total loans rising to 1.84% at quarter end from 1.66% as of June 30. This uptick suggests a need for enhanced risk management strategies.

Forward-Looking Guidance

Looking ahead, Origin Bancorp provided guidance for the remainder of 2025 and into 2026. The company anticipates a pretax pre-provision return on assets (ROA) increase, with the net interest margin expected to stabilize around 3.65% in Q4 2025. Despite a flat loan growth outlook for 2025, the company expects to return to mid- to high single-digit growth in 2026. Fee income is projected to grow in the low double digits year-over-year for Q4. The company remains committed to its Optimize Origin initiative, focusing on growth opportunities, particularly in the Texas and Southeast markets.

In conclusion, Origin Bancorp’s earnings call revealed a company navigating both growth and challenges. While strong loan originations and deposit growth signal positive momentum, issues like the Tricolor charge-off and increased nonperforming assets present hurdles. The company’s forward-looking guidance suggests a cautious yet optimistic outlook, with strategic initiatives aimed at sustaining growth and improving financial metrics.