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Origin Bancorp Inc. reported its first-quarter 2025 earnings, exceeding analysts’ expectations with an EPS of $0.71 against a forecast of $0.66. The company also reported revenue of $94.06 million, slightly surpassing the expected $93.58 million. Despite the positive earnings report, the stock price fell by 3.12% to close at $31.74, reflecting investor concerns over broader market trends. According to InvestingPro data, four analysts have recently revised their earnings estimates upward for the upcoming period, suggesting continued confidence in the company’s performance trajectory.
Key Takeaways
- Origin Bancorp’s Q1 2025 EPS of $0.71 beat the forecast by $0.05.
- Revenue slightly exceeded expectations at $94.06 million.
- The stock price declined by 3.12% following the earnings release.
- The company launched the "Optimize Origin" initiative to streamline operations.
- Forward guidance indicates potential challenges with loan growth and macroeconomic uncertainty.
Company Performance
Origin Bancorp demonstrated solid performance in Q1 2025, with a notable expansion in its net interest margin by 11 basis points to 3.44%. The company continues to grow its tangible book value, marking the 10th consecutive quarter of growth. Trading at 0.84 times book value and maintaining a P/E ratio of 12.11, the bank shows attractive valuations relative to peers. For deeper insights into Origin Bancorp’s valuation metrics and growth potential, investors can access comprehensive analysis through InvestingPro, which offers exclusive financial health scores and detailed research reports.
Financial Highlights
- Revenue: $94.06 million, slightly above the forecast of $93.58 million.
- Earnings per share: $0.71, compared to the forecast of $0.66.
- Net interest margin increased to 3.44%.
- Tangible book value rose to $32.43.
Earnings vs. Forecast
Origin Bancorp’s EPS of $0.71 surpassed the forecast by approximately 7.6%, while revenue was marginally higher than expected. This positive surprise is consistent with the company’s recent trend of outperforming expectations.
Market Reaction
Despite the earnings beat, Origin Bancorp’s stock fell 3.12% to $31.74. This reaction could be attributed to investor concerns about the company’s future growth prospects and broader market volatility. The stock remains within its 52-week range, with a low of $28.80 and a high of $41.17. InvestingPro analysis suggests the stock is currently undervalued, with analysts setting price targets between $39 and $44. The company maintains a moderate beta of 0.78, indicating lower volatility compared to the broader market.
Outlook & Guidance
Origin Bancorp has adjusted its loan growth guidance to the lower end of its previous range, reflecting caution amid macroeconomic uncertainty. The "Optimize Origin" initiative is expected to yield increased benefits, now projected at $23 million. The company also anticipates a net interest margin of 3.5% by Q4 2025. With a market capitalization of $946.51 million and a healthy dividend yield of 1.89%, the bank maintains strong fundamentals despite near-term challenges. The company’s revenue CAGR of 11% over the past five years demonstrates its consistent growth trajectory.
Executive Commentary
CEO Drake Mills highlighted the strategic advantage of the company’s geographic footprint, stating, "Our footprint is such an advantage for us in that there’s still so much migration into Texas and the Southeast." CFO Wally Wallace emphasized fiscal prudence, noting, "We are being extraordinarily thoughtful on every incremental dollar that we invest."
Risks and Challenges
- Macroeconomic uncertainty could impact loan growth.
- Potential rate cuts may affect net interest margins.
- Competitive pressures in the banking sector.
- The challenge of managing deposit costs amidst market volatility.
- The possibility of crossing the $10 billion asset threshold, which could bring regulatory challenges.
Q&A
During the earnings call, analysts inquired about the company’s loan growth potential and deposit cost management strategies. Executives addressed concerns about macroeconomic conditions and detailed progress on the "Optimize Origin" initiative, reinforcing their commitment to strategic growth and efficiency.
Full transcript - Origin Bancorp Inc (OBK) Q1 2025:
Tom, Evercore Coordinator, Evercore: Good morning, and welcome to the Orange Camp Bancorp Inc. First Quarter Earnings Conference Call. My name is Tom, and I will be your Evercore Coordinator. The format of the call includes prepared remarks from the company followed by a question and answer session. All attendees will be on a listen only mode until the Q and A portion of the call.
Please note this event is being recorded. I would now like to turn the conference call over to Chris Riegelman, Director of Investor Relations. Please go ahead.
Chris Riegelman, Director of Investor Relations, Origin Bancorp: Good morning, and thank you for joining us today. We issued our earnings press release yesterday afternoon, a copy of which is available on our website along with the slide presentation that we will refer to during this call. Please refer to Page two of our slide presentation, which includes our Safe Harbor statements regarding forward looking statements and the use of non GAAP financial measures. For those of you joining by phone, please note the slide presentation is available on our website at www.ir.origin.bank. Please also note that our Safe Harbor statements are available on Page seven of our earnings release filed with the SEC yesterday.
All comments made during today’s call are subject to the Safe Harbor statements on our slide presentation and earnings release. I’m joined this morning by Origin Bancorp’s Chairman, President and CEO, Drake Mills President and CEO of Origin Bank, Lance Hall our Chief Financial Officer, Wally Wallace Chief Risk Officer, Jim Crotwell our Chief Accounting Officer, Steve Brawley and our Chief Credit and Banking Officer, Preston Moore. After the presentation, we will be happy to address any questions you may have. Drake, the call is yours.
Drake Mills, Chairman, President and CEO, Origin Bancorp: Thanks, Chris, and thanks for being with us this morning. I am proud of the employees of Origin and their commitment to the strategic path we are currently on. We all know there are macroeconomic factors impacting the markets, but we have proven through previous cycles that our focus remains on serving our customers, our communities, our shareholders regardless of where we are in the cycle. During last quarter’s earnings call, we introduced Optimize Origin, our plan to deliver sustainable elite level financial performance. I am pleased with the overwhelming focus and commitment our employees have accomplishing this goal and the progress we’ve made since launch.
As we continue to communicate, we expect the strategic actions that we have taken and will continue to implement will drive us to an ROA run rate of 1% or greater by the fourth quarter this year. Our ultimate target is for ROA to be in the top quartile of our peers. In the first quarter, we identified the next steps in reaching our run rate goal through the restructuring of our mortgage business. This has been an area of focus for us through Optimize Origin and we believe through a partnership model, we will create efficiencies that will lead to an annual pretax earnings improvement of approximately 1,500,000 beginning in the second half of the I’m pleased with our results for the quarter in particular our net interest margin expansion. Our bankers are doing a great job of managing costs and it shows in our results.
Net interest income continues to improve quarter over quarter and our annualized ROA was 93 basis points. Our management team is focused on delivering results and I’m proud of how we started the year. Now I’ll turn it over to Lance and the team.
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: Thanks, Drake, and good morning. As Drake mentioned, we remain laser focused on OptimizeOrigin and committed to delivering elite level financial performance. Last quarter, we talked about Origin’s new internal performance statement, which properly aligns Origin’s deep commitment to culture with the drive to be performer. I’m extremely encouraged with the passion and level of commitment our employees are showing for Optimize Origin throughout our markets. This passion and commitment were especially on display during the month of March as we set time aside to acknowledge our organizational commitment to culture through our annual culture celebration.
This year, our theme was culture and performance, and I saw firsthand the enthusiasm that our employees have towards our strategic path to be the best bank in America. This commitment to culture and performance was also reflected in our most recent all employee Microsoft Viva Glint survey, which measures our culture compared to many of the top companies in the nation and around Origin continues to show levels of employee engagement well within the global top 10% benchmark. This speaks to the alignment of our employees have with our strategic direction. As we work towards a near term goal of an ROA run rate of 1% or greater by the fourth quarter of this year, deposit and loan growth remain a priority for our bankers.
We have spoken often about core deposits being the driver of loan growth. We still expect mid to high single digit loan growth in 2025. And to do so, we anticipate we will grow deposits in order to fund that loan growth. Historically, we have seen flat deposit growth in
Wally Wallace, Chief Financial Officer, Origin Bancorp: the first quarter based on our outflows of public funds. But even with that seasonality,
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: I was proud of our results this quarter as deposits, excluding brokered, grew 7.2% on an annualized basis. This sets us up well to fund the loan growth that we expect to see in the back half of the year. I’m encouraged with what I’m hearing out of our markets as our pipelines continue to build. We remain committed to deepening relationships with our customers that drive long term value Now I’ll turn it over to Jim.
Jim Crotwell, Chief Accounting Officer, Origin Bancorp: Thanks, Lance. As I have shared on prior calls, we have built a strong credit culture at Origin as we continue to focus on client selection and portfolio optimization. The working partnership of our credit and risk teams with our market presidents lays the foundation for our portfolio management as well as portfolio growth. Whether through our weekly loan committee, our monthly asset quality review committee by market or our monthly credit loan review committee, we continue to effectively monitor and manage our portfolio. You may recall that beginning in the second quarter of last year, we began to proactively exit relationships that were determined to not fit our client selection criteria.
During the first quarter, we achieved approximately $50,000,000 in desired reductions, bringing the total targeted reductions to approximately $200,000,000 over the past four quarters. We continue to believe that this optimization of our portfolio will serve us well moving forward. Past due loans held for investment came in at 0.96% at quarter end, up from 0.56% as of twelvethirty one and were comparable to levels reported for Q2 twenty twenty four. Of the $30,000,000 increase in past dues, dollars 2,100,000.0 has already paid off in full, dollars 16,500,000.0 is anticipated to be paid off in the near term and a $5,200,000 renewal is pending. Classified loans increased $8,900,000 to 1.68% from 1.57% of loans as of December 31, while nonperforming loans increased $6,400,000 for the quarter to 1.07% from 0.99.
The increase in classified loans was primarily driven by four relationships totaling $17,400,000 which were partially offset by the payoff of two classified credits totaling $6,300,000 As to non accruals, the increase was primarily driven by two relationships, partially offset by the payoff of one previous non accrual loan. Net charge offs for the quarter came in at $2,700,000 net of $2,100,000 in recoveries. On an annualized basis, net charge offs were 0.15%, which was better than our expectations. On a percentage basis, our allowance increased from 1.25% to 1.28% net of mortgage warehouse. In late twenty twenty two, we began focusing on the Moody’s S-two scenario as the basis for our economic forecast within our CECL model.
For some time, this scenario has called for a mild recession beginning the quarter following the report date and lasting three quarters. Since we have focused on this scenario for some time, we did not experience any significant changes in our CECL model for this quarter since current economic headwinds are essentially factored into this scenario. Lastly, as to ADC and CRE, we continue to have ample capacity to meet the needs of our clients and grow this segment of our portfolio, reflecting funding the total risk based capital of 61% for ADC and 232% for CRE. We continue to be well positioned to support our customers and provide strategic growth. I’ll now turn it over to Wally.
Wally Wallace, Chief Financial Officer, Origin Bancorp: Thanks, Jim, and good morning, everyone. Turning to the financial highlights. In Q1, we reported diluted earnings per share of $0.71 As you can see on Slide 26, the combined financial impact of notable items during the quarter equated to a net expense of $2,300,000 equivalent to $06 in EPS pressure. On the balance sheet side, deposits were up 1.4% during the quarter. And excluding brokered, deposits grew 1.8% linked quarter.
We were able to use excess liquidity to allow brokered deposits to continue rolling off our balance sheet with brokered deposits declining to just $50,000,000 the lowest level since the fourth quarter of twenty twenty two. While noninterest bearing deposits declined 0.6% sequentially, we attribute this decline to normal seasonality. Importantly, on a year over year basis, non interest bearing deposits were up slightly, the first quarter of year over year growth, also since the fourth quarter of twenty twenty two. As a percent of total deposits, noninterest bearing deposits remained stable at about 23%, and we continue to anticipate they will remain in the 22% to 23% range through 2025. Our loan to deposit ratio, excluding mortgage warehouse, remains below our 90% target at 86.1, and our deposit and liquidity trends remain strong.
Given the strong deposit trends we have experienced over the past year, our bankers across our markets remain focused on growth. As Lance noted, we are maintaining our loan growth outlook for 2025. However, we are cognizant of increased macro uncertainty given recent policy announcements and have adjusted our own models to the lower end of our guided range. Turning to the income statement. Net interest margin expanded 11 basis points during the quarter to 3.44%, ahead of our expectations as both loan yields and deposit costs were better anticipated.
We remain pleased that deposit costs continue to trend in line with our historical beta trends and loan pricing remains disciplined across our markets. Moving forward, as you can see in our outlook on Slide four, due primarily to a higher starting point in 2Q twenty twenty five, we increased our margin guidance by five basis points to 3.5% in 4Q twenty twenty five and three point four five % for the full year, plus or minus 10 basis points. Our underlying Fed rate cut, yield curve and deposit beta assumptions remain unchanged from prior guidance. In our modeling, higher margin expectations offset the impact of moving our loan growth to the lower end of the range. Shifting to non interest income, we reported $15,600,000 in Q1.
Excluding $144,000 in net benefits from notable items in Q1 and $14,400,000 in net pressures in Q4, non interest income increased to $15,500,000 from $14,100,000 in Q4, due primarily to normal seasonality in our insurance business with seasonality in our mortgage business offset. Notably, with the changes in our mortgage business, as discussed in Drake’s remarks, we anticipate our non interest income run rate will be 400,000 to $500,000 lower on a quarterly basis beginning in 3Q. Our non interest expense decreased to $62,100,000 in Q1 from $65,400,000 in Q4. Excluding $2,100,000 of notable items in Q1 and $3,500,000 in Q4, non interest expense declined to $60,000,000 from $61,900,000 in Q4. While optimized Origin efforts undertaken in Q4 benefited Q1 expense as expected, Q1 expense was better than we anticipated due to additional optimized origin benefits, a lower regulatory assessment base and a lower franchise tax rate among other benefits with minimal offsetting pressures.
We anticipate an increase in our 2Q expense run rate compared to 1Q. However, with the anticipated changes to our mortgage business previously discussed, we expect our run rate excluding notable items to decline beginning in Q3. We are reducing our guidance for year over year non interest expense to be down low single digits in 4Q twenty twenty five and flat to down slightly for the full year 2025. Lastly, turning to capital, we note that Q1 tangible book value grew sequentially to $32.43 the tenth consecutive quarter of leads quarter growth. And the TCE ratio ended the quarter percent, up from 10.3% in Q4.
Also, as shown on Slide 25 of our investor presentation, all of our regulatory capital levels at both the bank and holding company remain above levels considered well capitalized. As such, we remain confident that we have the capital flexibility to take advantage of any potential future capital deployment opportunities to drive value for our shareholders. With that, I will turn it back
Drake Mills, Chairman, President and CEO, Origin Bancorp: to Drake. Thanks, Wally. I’m encouraged by the position our company is in and the progress we are making as we optimize Origin. With the uncertainty in the markets, we are focused on our relationships as we understand how current conditions are impacting their businesses. In my past, uncertainty has created opportunities.
Origin is blessed with the strength, capacity and people to enhance profitable relationships that fit our risk profile. I sincerely thank each of you for your interest and support of Origin Bancorp. We’ll open it up for
Tom, Evercore Coordinator, Evercore: session. Our first question comes from Matt with Stephens. Matt, your line is open. You may
Tim, Analyst, Raymond James: I’ll
Matt, Analyst, Stephens: start on the loan growth front. And it sounds like you still have some optimism on growing loan balances. I think Lance said pipelines are building, good deposit growth in the first quarter that can fund the growth for the remainder of the year. But internally, I think you said you’re now assuming the low end of your previous guidance, so kind of mid single digit range, if I heard that right. I guess I’m curious kind of what you’re hearing from your client discussions given the macro uncertainty.
And just what gives you the confidence that the loan growth will improve? And then I guess the last part of the question would be around the client selection process. That’s been a headwind over the last year, and Jim gave us some good numbers around that. I’m curious kind of where you are in that process.
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: Hey, Matt, this is Lance. Great question. I’ll start it with it and then Drake may want to jump in kind of on the conversations he’s having with clients and bankers in the market, then I’ll let Jim talk about any headwinds. But yes, so obviously with macroeconomic and tariff questions, we went even deeper the last few weeks on trying to understand what pipelines are going to look like and having direct conversations with a lot of key customers and our bankers. First, our bankers are really energized right now on calling efforts and relationship building.
As we’ve talked about in the past, staying under 10b was a little more painful than I would have thought it was going to be, especially around sort of holding back on CRE. So as we kind of went around to all of our markets in Q1, doing our annual kickoffs and talking about strategic planning and goals, there’s a real energy of sort of getting back out and being proactive in the markets, which is really awesome. We spent a lot of time with the President sort of modeling up what the next ninety days looks like, what the end of the year looks like. We are seeing pipelines building nicely. I could tell you anecdotally, we actually saw a really nice growth in the month of March.
And then we were there were a couple of large projects in North Texas that we were projecting that would close in April that closed that actually paid off at the last couple of days of March, which kind of pulled back our number somewhat. So as I look at our pipeline for the next quarter, it’s really in line with where our budget was. Now we’re realistic too. And then having these conversations, we have seen a couple of projects that have been sort of delayed or pulled back because of understanding what’s going to go on with tariffs and what people are going be looking at with costs around lumber and steel and other inputs. So, trying to be thoughtful around where we see growth.
But to say that we are optimistic that we get back to sort of origin levels of growth in the near term is something I firmly believe in.
Drake Mills, Chairman, President and CEO, Origin Bancorp: Hey, Matt, this is Drake. As you know, I spend a tremendous amount of time in the markets in front of our clients. Our relationship managers quarterly publish their handle experiences with how business is going, how tariffs are impacting business. And it’s been pretty interesting as I summarize the last quarter of visits information and evidence of what is going on in the market. It would tell you by just listening to external sources that uncertainty has certainly been negative.
But as I put this together and it’s difficult to sit here and say, I’m optimistic, but truly when you look at the data and you look at the information that I have, there is opportunity and it does give us the belief that because of our footprint, because of our customer base and type of projects we’re looking at that we can get to the level of growth that where we might be looking at the low end of that level now, we still feel pretty confident we can get there.
Jim Crotwell, Chief Accounting Officer, Origin Bancorp: Matt, this is Jim. Good morning. As to our client selection project, I think gone really, really well. As you heard me say that we’ve now exited about $200,000,000 And I would say we’re probably in the seventh inning, getting into the seventh inning stretch on that project. So have a little bit more that we’ll be focused on, but feel very, very pleased with what we’ve accomplished to date.
Matt, Analyst, Stephens: Okay, great. Well, appreciate all the commentary on the loan growth question. And then I guess moving over to the Optimize origin discussion. I think last time in January, discussed annualized benefits around $20,000,000 and now we’ve moved this up to $23,000,000 Great to see this. Just would love to hear any discussion about how much of this incremental savings would drop to the bottom line versus how much of the incremental savings that we’re seeing would be reinvested into the platform?
Wally Wallace, Chief Financial Officer, Origin Bancorp: Matt, I think you can look at our guidance for the fourth quarter year over year expense run rate to be down in the low single digits range, which is a better guide than what we gave last quarter to get a sense of how much we think flows through. We are being extraordinarily thoughtful on every incremental dollar that we invest. And I think you can see in our guide that we anticipate pulling a decent portion of that down to the bottom line. But we are not going to pull back on investment opportunities that come our way from the standpoint of good hires, good technology spend, etcetera. So we’re being very cognizant not to cut to the bone but to trim.
Matt, Analyst, Stephens: Yes. Okay. Thanks for that, Wally. And then maybe just another one for Wally and maybe kind of a tag team with Lance. The interest bearing deposit costs, we saw a really nice move lower in the first quarter, which is great to see.
Would love just to hear your overall take on deposit pricing competition in the markets. How much pushback did you get from the customers as you brought down those deposit costs? Any surprises? And then I think the cumulative beta on your deposits, interest bearing deposits so far in the cycle is now close to 80%. I think the guidance still assumes two more rate cuts the back half of the year.
Would love to hear just kind of your assumptions and thoughts about those betas in the back half of the year.
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: Yes. I’ll take the narrative part first. It’s been interesting, Matt. I think we’ve done a really good job of communicating with customers and our value proposition and walking through this. The presidents have been really proactive.
I will say that I’ve been somewhat surprised in the competition. We have seen, even in the last two weeks, some CD specials in our markets that are dramatically higher than I would have thought. We’re really focused kind of on the money market business and sort of how that we can operate there. So we’ve been able to do this very effectively. I’m obviously mindful of what competition is doing, but we’re also mindful of projected rate cuts and want to make sure we get ahead of that from a deposit cost perspective.
So this is something we’re continuing to really push hard on and making sure we’re positioned hopefully aligned with and maybe even prior to the next rate cut.
Wally Wallace, Chief Financial Officer, Origin Bancorp: And Matt, I’ll just add on the beta side. For our modeling right now where we discuss two rate cuts model, we still assume our historical betas hold. When we look at various rate scenarios where perhaps there’s more cuts than we have in our models, we do tend to ratchet down our beta assumptions with the assumption that as we get further in the cycle, there’s going to be less, for lack of a better term, low hanging fruit on the deposit beta side. That said, you’ll note that even though we in our own modeling took our loan growth assumptions down to the lower end of the guided range, we took our net interest margin guidance up. And I would just say that if we don’t have as much stress on the liquidity front, then that gives us more opportunity to manage on the cost side.
If we are seeing loan growth come in towards the higher end of the range, that could create a need to bring in more deposits at higher costs. So perhaps the NIM comes slightly lower than our models. However, net net, the net interest income expectations still increase in that scenario. So we feel pretty good about the deposit betas, and we try to be cognizant of the puts and takes on that relative to Fed cuts and loan growth.
Matt, Analyst, Stephens: Yes. Okay. Makes sense, Wally. Appreciate that. That’s it for me, guys.
I’ll step back. Thank you.
Tom, Evercore Coordinator, Evercore: Thank you, Matt. Our next question comes from Tim with Raymond James. Tim, your line is open. You may proceed.
Tim, Analyst, Raymond James: Hey, good morning, everyone. Thanks for taking my questions. Just want to follow-up on loan growth and just your thoughts on payoffs in commercial real estate. It declined a little bit this quarter. We’ve heard from some other banks that customers are maybe thinking about extending loans and for a year or so just given the expectation for rate cuts and such.
Just curious how that’s contemplated in your outlook and any thoughts you have there?
Matt, Analyst, Stephens: Yes. It’s interesting. It kind of
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: in the conversations, as you understand, it’s just the uncertainty from a macro level does give pause to customers, but it really is kind of industry specific. So we were kind of looking at revolvers, looking at what we’re seeing in sort of project timelines. We’ve seen little bit more utilization in our C and I operating lines, and we’re actually starting to hear some C and I clients talk about potential inventory builds to get ahead of projected cost increases on their inputs, which is interesting. And again, it really kind of depends on the industry on what they’re thinking about projects. So while we’ve had a few talk about delaying and pulling back, we’ve actually had some anecdotal evidence from others that some larger projects are full on board.
So a little bit of a mixed bag right now. Luckily for us, our footprint is such an advantage for us in that there’s still so much migration into Texas and the Southeast that those two specifically kind of continue to create opportunity just from gains of people moving in, gains of economic growth.
Tim, Analyst, Raymond James: Got it. And then if you could just give us any update on the hiring efforts, any opportunities you’re seeing? And then any update to the Panhandle South Alabama team and how they’re progressing and any updated expectations for them this year?
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: Yes, be glad to. So obviously, strategic hires, whether you turn that lift outs or individuals is one of the key strategic drivers of Oregon. It’s been that way for twenty years. We build our foundation and our geographic management model so that we could take advantage of any dislocation or opportunities. So we are actively looking at hiring of really productive commercial bankers, specifically with C and I backgrounds and banking teams.
So for us, we have reduced our REM headcount pretty significantly over the last year through OPTIMIZE. That was never the intention of simply just reducing that expense. It was creating capacity so that we could reduce low performers and reinvest into high banking teams. So, we are actively having conversations, North Texas specifically. And then our Houston team has been doing an amazing job.
I mean, the numbers coming out of Houston have been spectacular. They have been the leader for us on both the loans and deposit side. They actually have the lowest deposit costs right aligned with Louisiana. So super pleased where we are there. Nate and his team in the Southeast are producing right in line with what they thought from a budget perspective.
We’re expecting nice growth in the second half of the year from them. We’ve got a really strong pipeline in the Southeast. And Drake spent a lot of time down in Mobile a few weeks ago and understanding the impact that the port is having, the impact that migration into Alabama and Florida is having. And I would say we’re more bullish on that decision we made in the Southeast today than we even were a year ago.
Matt, Analyst, Stephens: It’s great to hear.
Tim, Analyst, Raymond James: And one last one on fees and the reduced outlook. Obviously, mortgage saw some pressure this quarter, but the swap income was actually up pretty nicely. Just any thoughts around those two items and the drivers of the reduced outlook?
Wally Wallace, Chief Financial Officer, Origin Bancorp: Yes. So probably saw in earnings release and heard in Drake’s commentary that we’ve restructured our mortgage segment. And the new model will result in a meaningfully lower expense base. But with that, we also will have some pressure on the revenue side of the equation. That’s the biggest driver of the change in the guidance.
You did mention the swap income. That’s part of an initiative around Optimize Origin. We’ve really been focusing on that aspect of our business, and we feel like there could be some opportunity there. Hopefully, we’re conservative in our guidance on that side. And then also, you’ll note that we did have some pressures in the first quarter around some of our LP investments.
So assuming that that’s more one time in nature, there are some tailwinds to offset the headwinds that come with the mortgage restructuring on the revenue side.
Tim, Analyst, Raymond James: Got it. All right. Thanks for taking my questions.
Drake Mills, Chairman, President and CEO, Origin Bancorp: Tim, thank you.
Tom, Evercore Coordinator, Evercore: Thank you again, Tim. Our next question comes from Mark, your line is open. You may proceed.
Tim, Analyst, Raymond James: Hey, guys. Good morning.
Matt, Analyst, Stephens: Good morning,
Tim, Analyst, Raymond James: Mark. Yes. You noted that, obviously, there’s been some pent up demand and that bankers are energized. Pipelines look strong. But if these sort of macro headwinds to growth remain in the industry, does that change how you guys think about the $10,000,000,000 threshold and potentially crossing that this year?
Drake Mills, Chairman, President and CEO, Origin Bancorp: Yes. We have ongoing conversations around crossing that threshold. But for us, it’s we I think we have purposely created the environment to go over 10b. I would say that if we do see significant negative impact to markets and we see pullbacks and lack of growth and we are sitting close to that line in the end of the fourth quarter, it definitely makes sense for us to pull back and not cross that line. But our intentions are, as we speak, to continue to drive with an optimistic approach that we’ll see growth and what we expect these pipelines to do will actually happen.
So it’s again, it’s teetering, but it’s time for us to move forward and grow. And unless the wheels come off of it, I expect that’s what’s going to happen.
Tim, Analyst, Raymond James: Yes, that makes sense. And so I guess switching gears, I know organic growth is the focus, but capital is strong. Is there any interest in using the share buyback at these levels?
Drake Mills, Chairman, President and CEO, Origin Bancorp: Absolutely. I think it’s a bargain as we speak, and I’m confident in it. And I think you’ll see some activity. We also and I want to remind you that we have opportunities utilize capital with a call of sub debt in November that’s about $75,000,000 So we’ll be planning on heading that direction. That’s extremely helpful to the run rate.
So that’s going to be a utilization of capital also, but expect to see some repurchase activity.
Tim, Analyst, Raymond James: Got it. Thanks. That’s it for me guys. Appreciate it.
Drake Mills, Chairman, President and CEO, Origin Bancorp: Thank you.
Tom, Evercore Coordinator, Evercore: You again, Mark. Our next question comes from Manuel with D. A. Davidson. Manuel, your line is open.
You may proceed.
Manuel, Analyst, D.A. Davidson: Hey, I appreciate the commentary on competition on the deposit side. But maybe you said it, but how are you seeing new loan yields come in? And is there any change on competition on the lending side on the pricing?
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: Yes. I’ll say maybe Wally can see from his chair. But I’ve been real pleased with where we’re seeing loan yields. It’s still it’s been coming in kind of the 7.3% to 7.5% range. I haven’t seen banks acting crazy in that regard.
So it’s been more a little bit on the deposit side that I’ve scratched my head on. So I’ve been pleased with where our bankers are competition is on loan yields.
Manuel, Analyst, D.A. Davidson: And the commentary before on the deposit side, that was more CDs,
Chris Riegelman, Director of Investor Relations, Origin Bancorp: not in your not in
Manuel, Analyst, D.A. Davidson: the money market side? Was that the key differentiator there?
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: Yes. Jeff, what we’ve been seeing from a competition perspective has been marketing in Texas and North Louisiana, Mississippi is really on the CD side. And then I’ll say, I’m just from an origin perspective, I’m really pleased with what we’ve done on the deposit side. I think it’s masked a little bit with the way that we’ve shifted the mix. I mean, if you look at NIBs have been relatively flat.
But if you look at money market and demand for us year over year over the last twelve months, we’ve actually grown our deposits in those areas by about $550,000,000 which has then been a direct offset to reducing brokered deposits by $550,000,000 So that’s been a nice lift to NIM, on deposit costs, but really just to focus on relationships and positioning our balance sheet in a better way.
Manuel, Analyst, D.A. Davidson: Okay. I appreciate that. On a somewhat different topic, the to be decided pieces of the Optimize Origin initiative, Can you kind of give updates there around Origin?
Matt, Analyst, Stephens: We’ll be glad to
Lance Hall, President and CEO of Origin Bank, Origin Bancorp: Sure, Will. Thank you. Yes. So as we talked about the levers last time, obviously, it was mortgage one. And obviously, we’re we’ve announced that internally to our people this week that that’ll be a significant reduction in expense as we change in what we’re kind of calling community mortgage partnership model and really sort of taking the fixed price of the manufacturing process out of the mortgage business on our end, really supporting our MLOs, enhancing our private banking delivery, but really and also supporting our communities that need a mortgage but do it in a much more efficient and effective way.
Number two is Argent. We are at 19.5% ownership in that regional wealth firm. They get an annual valuation on their share price from a third party. We’re expecting that in the next two weeks. My anticipation would be that that valuation would trigger some potential sellers that would give us the opportunity at that point to get above 20%.
So my expectation would be that’s something that we’ll be talking about in the next quarter, which is really exciting based on their trajectory. They’re doing a really good job of growing assets, seeing nice trends in their EBITDA growth and their revenue growth. So, really continue to be really optimistic on what Arjun’s doing in our partnership there. And then we continue to work with our third party consultant on efficiency and process management projects. We’ve identified a few first steps that we’re working through.
We think there’s going to be some meaningful results that come out of there, both on the revenue side when it comes to cards and treasury as well as efficiencies on some process improvements. So we continue to focus very look very closely at all those opportunities as we really, really push in this OPTIMIZE.
Manuel, Analyst, D.A. Davidson: That’s really helpful. Just briefly on the you there’s a lot of uncertainty here, nothing is guaranteed. But if you were able to get Arjun above that 20% level, that should benefit fees. Is that in your guidance at the moment?
Wally Wallace, Chief Financial Officer, Origin Bancorp: We’re not putting anything that we haven’t quantified in the guide. So no.
Manuel, Analyst, D.A. Davidson: Thank
Tom, Evercore Coordinator, Evercore: you again, Manuel. This concludes the Q and A. Handing it back to Drake Mills for any final remarks.
Drake Mills, Chairman, President and CEO, Origin Bancorp: As I sit here, you would think that it would be difficult to remain optimistic with the level of uncertainty and volatility in the markets. But as I said earlier, as I visit our customers to get the insights into their business, as I witness our progress and enhancing our culture and our performance, when I see the level of commitment by our employees to perform with energy and optimism, it reinforces that uncertainty creates opportunity if you’re in a position to take advantage of the markets. And we are in position to do just that. Historically, we’ve experienced our best growth during these times, I think back to 02/2008 and through those years. So I am remaining optimistic.
I do think that our client base, I think our footprint are positives as we move forward. I appreciate your time today. I appreciate your interest and support in Origin. And I look forward to seeing each of you in the future. Thank you.
Wally Wallace, Chief Financial Officer, Origin Bancorp: Ladies
Tom, Evercore Coordinator, Evercore: and gentlemen, this concludes today’s Evercore. Thank you and have a great day.
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