8-K: Origin Bancorp Declares Dividend, Q3 Earnings Hit by Fraud

Origin Bancorp announced a $0.15 quarterly dividend and reported Q3 2025 net income of $8.6 million, significantly impacted by a $29.5 million provision for a suspected borrower fraud.

Summary

• Origin Bancorp, Inc. declared a quarterly cash dividend of $0.15 per share of its common stock, payable on November 28, 2025, to stockholders of record as of November 14, 2025.
• Net income for the third quarter of 2025 was $8.6 million, or $0.27 diluted earnings per share, a decrease of 41.1% compared to $14.6 million, or $0.47 diluted EPS, in the linked quarter.
• Pre-tax, pre-provision (PTPP) earnings significantly increased to $47.8 million for Q3 2025, up 122% from $21.5 million in the linked quarter.
• The provision for credit losses surged to $36.8 million in Q3 2025, primarily due to a $29.5 million increase related to suspected borrower fraud impacting the Tricolor Holdings, LLC loan relationship.
• Net charge-offs increased by $29.1 million to $31.383 million in Q3 2025, largely driven by $28.4 million related to the Tricolor Holdings, LLC fraud.
• Net interest income reached $83.7 million, a 1.9% increase from the linked quarter and its highest level in the previous ten quarters.
• The fully tax equivalent net interest margin (NIM-FTE) expanded by four basis points to 3.65% in Q3 2025, also its highest in ten quarters.
• Total deposits grew by $208.8 million, or 2.6%, to $8.33 billion at September 30, 2025, with noninterest-bearing deposits increasing by 8.6%.
• The company repurchased 265,248 shares of common stock at an average price of $35.85 per share during the quarter, bringing year-to-date repurchases to 401,647 shares at an average price of $34.59 per share.
• Book value per common share increased to $39.23, and tangible book value per common share rose to $33.95.
• An additional investment in Argent Financial increased ownership to over 20%, resulting in a $7.0 million fair value adjustment gain and $1.2 million in equity method investment income, with an estimated $6.0 million pre-tax annualized benefit starting in Q4 2025.
• The 'Optimize Origin' initiative, launched in January 2025, aims for a greater than 1% ROAA run rate by Q4 2025 and an ultimate target of top quartile ROAA, with identified total estimated annualized benefits of approximately $37.2 million pre-tax.

Sentiment

Score: 3

Explanation: The sentiment is negative due to a significant drop in net income and EPS, primarily driven by a substantial provision for credit losses and net charge-offs related to a suspected borrower fraud. While underlying operational metrics like PTPP earnings, NIM, and deposit growth show positive trends, the magnitude of the credit quality issue overshadows these improvements.

Positives

• Pre-tax, pre-provision (PTPP) earnings increased significantly by $26.3 million (122%) to $47.8 million in Q3 2025, indicating strong underlying operational performance.
• Net interest income reached $83.7 million, its highest level in the past ten quarters, reflecting a 1.9% increase from the linked quarter.
• Net interest margin (NIM-FTE) expanded by four basis points to 3.65%, also a ten-quarter high, driven by improved funding mix and higher yields on interest-earning assets.
• Total deposits increased by $208.8 million (2.6%) to $8.33 billion, with noninterest-bearing deposits growing by 8.6%, improving the funding mix and reducing borrowings.
• The company repurchased 265,248 shares of common stock during the quarter, demonstrating a commitment to shareholder returns.
• Book value per common share increased by 1.6% to $39.23, and tangible book value per common share increased by 1.9% to $33.95.
• The strategic investment in Argent Financial generated a $7.0 million fair value adjustment gain and $1.2 million in equity method investment income, with an estimated $6.0 million pre-tax annualized benefit expected from Q4 2025.
• The 'Optimize Origin' initiative is ahead of pace, targeting a greater than 1% ROAA run rate by Q4 2025 and an ultimate top quartile ROAA, with an estimated $37.2 million in annual pre-tax pre-provision earnings improvement.
• All capital ratios (Common Equity Tier 1, Tier 1 Capital, Total Capital, Tier 1 Leverage) remain above 'Well Capitalized' thresholds.

Negatives

• Net income decreased significantly by $6.0 million (41.1%) to $8.6 million in Q3 2025 compared to the linked quarter.
• Diluted earnings per share fell to $0.27 from $0.47 in the linked quarter.
• Provision for credit losses dramatically increased to $36.8 million, primarily due to a $29.5 million provision related to suspected borrower fraud impacting the Tricolor Holdings, LLC loan relationship.
• Net charge-offs surged to $31.383 million, an increase of $29.1 million from the linked quarter, largely attributable to the Tricolor Holdings, LLC fraud.
• Nonperforming loans held for investment (LHFI) to total LHFI increased to 1.17% from 1.11% in the linked quarter, indicating a deterioration in asset quality.
• The Federal Reserve reduced the federal funds target rate by 25 basis points on September 17, 2025, marking the fourth cut for a total of 125 basis points from its mid-2023 high, which could impact future net interest income.

Risks

• Changes in economic conditions generally and in the financial services industry, nationally and within primary market areas, including the impact of tariffs and financial stress on borrowers.
• Fluctuations in benchmark interest rates and their impact on net interest income.
• Deterioration of asset quality, including changes in the level and direction of loan delinquencies and write-offs, and changes in estimates of the adequacy of the allowance for loan losses.
• Factors impacting the performance of the loan portfolio, such as real estate values and liquidity in primary market areas.
• The financial health of commercial borrowers and the success of construction projects financed by the company.
• Changes in the value of collateral securing loans.
• The impact of generative artificial intelligence on operations.
• Inability to anticipate interest rate changes and manage interest rate risk effectively.
• Impact of heightened regulatory requirements and potential adverse business consequences if total assets exceed $10 billion.
• Effectiveness of the risk management framework and quantitative models.
• Inability to receive dividends from Origin Bank, service debt, pay dividends to common stockholders, repurchase shares, and satisfy obligations.
• Impact of labor pressures.
• Changes in operation or expansion strategy or ability to prudently manage growth.
• Inability to maintain important customer relationships, reputation, or avoid liquidity risks.
• Increasing costs associated with growing deposits.
• Operational risks inherent in the business.
• Significant turbulence or disruption in capital or financial markets and the effect of market disruption and interest rate volatility on investment securities.
• Increased competition in the financial services industry from regional, national institutions, and fintech companies.
• Compliance with governmental and regulatory requirements and changes in laws, rules, regulations, interpretations, or policies.
• Periodic changes to accounting rules and best practices.
• Further government intervention in the U.S. financial system.
• Deterioration of the credit rating for U.S. long-term sovereign debt.
• Ability to comply with applicable capital and liquidity requirements, including generating liquidity internally or raising capital on favorable terms.
• Natural disasters, adverse weather events, pandemics, acts of terrorism, war, and other matters beyond control.
• Developments in the mortgage banking business, including loan modifications, demand, and effects of judicial or regulatory requirements.
• Fraud or misconduct by internal or external actors (including Origin employees), as evidenced by the Tricolor Holdings, LLC fraud and questioned banker activity.
• Cybersecurity threats or security breaches and the cost of defending against them.
• Ability to maintain adequate internal controls over financial and non-financial reporting.
• Potential claims, damages, penalties, fines, costs, and reputational damage resulting from pending or future litigation, regulatory proceedings, and enforcement actions.

Future Outlook

The company's updated financial outlook for 4Q25 and 2025 assumes two additional 25-basis point Fed rate cuts in 4Q25. It projects flat year-over-year loan growth (excluding mortgage warehouse), low-single digit year-over-year deposit growth, a NIM of 3.65% +/3 BPS for 4Q25 and 3.60% +/3 BPS for 2025, high-single digit year-over-year net interest income growth, low-double digit year-over-year noninterest income growth (excluding notable items) for 4Q25 and flat for 2025, and a low-single digit decrease in year-over-year noninterest expense (excluding notable items). The tax rate is expected to be approximately 21.0%. The 'Optimize Origin' initiative targets a greater than 1% ROAA run rate by 4Q25 and an ultimate top quartile ROAA, with an estimated $37.2 million in total annualized pre-tax pre-provision benefits.

Management Comments

• "I am extremely proud of how we have executed on Optimize Origin and the momentum that has been created throughout our markets. We are ahead of pace on our stated plan and are creating real traction on our goal of being a top quartile ROA performer." Drake Mills, Chairman, President and CEO of Origin Bancorp, Inc.

Industry Context

The banking industry is navigating a dynamic interest rate environment, with the Federal Reserve having implemented multiple rate cuts, influencing loan and deposit rates. Regional banks like Origin Bancorp are focusing on operational efficiencies and balance sheet optimization, as seen with the 'Optimize Origin' initiative, to enhance financial performance. Credit quality remains a key area of focus, with specific fraud incidents highlighting the ongoing need for robust risk management in the sector.

Legal Proceedings

• The company is pursuing all possible opportunities for recovery related to the suspected borrower fraud impacting the Tricolor Holdings, LLC loan relationship, implying potential legal actions.
• An increase in provision for relationships impacted by 'questioned banker activity' suggests ongoing internal or external investigations that may lead to legal or regulatory matters.

Stakeholder Impact

• Shareholders: Will receive a quarterly cash dividend of $0.15 per share. The significant decline in net income and EPS due to fraud may negatively impact share price, but ongoing share repurchases and operational improvements could provide some support.
• Employees: The 'Optimize Origin' initiative includes headcount reduction as part of efficiency optimizations, potentially impacting employee morale and job security.
• Customers: The company maintains a culture committed to personalized relationship banking. The fraud incident, while impacting the company, may raise concerns about risk management, but the company is pursuing recovery.
• Creditors: The increase in nonperforming loans and charge-offs, particularly due to fraud, could raise concerns about asset quality, though capital ratios remain strong.

Next Steps

• Host an investor conference call and webcast on October 23, 2025, to discuss Q3 2025 financial results.
• Continue execution of the 'Optimize Origin' initiative to drive elite financial performance and enhance culture.
• Realize an estimated pre-tax annualized benefit of approximately $6.0 million from the Argent Financial investment starting in Q4 2025.
• Pursue all possible opportunities for recovery related to the suspected borrower fraud impacting the Tricolor Holdings, LLC loan relationship.

Key Dates

Recommendation

While the significant credit loss provision and net charge-offs due to fraud are major negative events, the underlying operational performance, as evidenced by strong PTPP earnings growth, NIM expansion, and deposit growth, suggests the core business is improving. The company is also maintaining its dividend and actively repurchasing shares. A seasoned investor might 'hold' to observe the recovery efforts from the fraud and the continued benefits of the 'Optimize Origin' initiative, rather than 'sell' based on what could be a one-time significant event, especially given the positive operational trends.

Keywords

Origin Bancorp, OBK, Quarterly Earnings, Dividend Declaration, Financial Results, Banking, Regional Bank, Credit Quality, Loan Fraud, Net Interest Margin, Deposits, Loans, Stock Repurchase, Optimize Origin, Asset Quality, Financial Holding Company