8-K: Origin Bancorp Reports Strong Q1 2025 Earnings, Driven by 'Optimize Origin' Initiative

Origin Bancorp announces a significant increase in net income and PTPP earnings for Q1 2025, fueled by its 'Optimize Origin' initiative.

Summary

• Origin Bancorp, Inc. reported net income of $22.4 million, or $0.71 diluted earnings per share (EPS), for the quarter ended March 31, 2025, compared to $14.3 million, or $0.46 diluted earnings per share, for the quarter ended December 31, 2024.
• Pre-tax, pre-provision (PTPP) earnings were $32.0 million for the quarter ended March 31, 2025, compared to $12.6 million for the linked quarter.
• The company's 'Optimize Origin' initiative, launched in January 2025, aims to drive elite financial performance and enhance company culture, targeting a greater than 1% ROAA run rate by 4Q25 and top quartile ROAA ultimately.
• Net interest income was $78.5 million for the quarter ended March 31, 2025, reflecting an increase of $110,000, or 0.1%, compared to the linked quarter.
• The fully tax equivalent net interest margin (NIM-FTE) expanded 11 basis points to 3.44% for the quarter ended March 31, 2025, compared to the quarter ended December 31, 2024.
• Return on average assets (ROAA), annualized, was 0.93% for the quarter ended March 31, 2025, a 63.2% increase when compared to 0.57% in the linked quarter.
• Total loans held for investment (LHFI) were $7.59 billion at March 31, 2025, reflecting an increase of $11.8 million, or 0.2%, compared to December 31, 2024.
• Total deposits were $8.34 billion at March 31, 2025, reflecting an increase of $115.3 million, or 1.4%, compared to December 31, 2024.
• The board of directors declared a quarterly cash dividend of $0.15 per share of its common stock, payable on May 30, 2025, to stockholders of record as of May 15, 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results and strategic initiatives aimed at further improvement. While there are some challenges noted, the overall tone is optimistic and confident.

Positives

• Significant increase in net income and PTPP earnings.
• Successful implementation of the 'Optimize Origin' initiative.
• Expansion of net interest margin (NIM-FTE).
• Increase in return on average assets (ROAA).
• Growth in total deposits.
• Declaration of a quarterly cash dividend.

Negatives

• Past due loans increased $30.3 million for the current quarter compared to the linked quarter.
• Nonperforming LHFI increased $6.4 million for the current quarter compared to the linked quarter, evidenced by an increase in the percentage of nonperforming LHFI to LHFI to 1.07% compared to 0.99% for the linked quarter.
• Classified loans increased $8.9 million to $127.7 million at March 31, 2025, compared to $118.8 million at December 31, 2024.
• Net charge-offs increased $3.3 million for the quarter ended March 31, 2025, when compared to the quarter ended December 31, 2024, primarily due to total charge-offs of $4.8 million in the current quarter, consisting primarily of two commercial and industrial loan relationships with charge-offs totaling $2.6 million.

Risks

• The impact of current and future economic conditions on the financial services industry.
• Changes in benchmark interest rates and their impact on net interest income.
• Deterioration of Origin's asset quality.
• Factors impacting the performance of Origin's loan portfolio, including real estate values and liquidity.
• The financial health of Origin's commercial borrowers and the success of construction projects.
• Changes in the value of collateral securing Origin's loans.
• The impact of generative artificial intelligence.
• Origin's ability to anticipate interest rate changes and manage interest rate risk.
• The impact of heightened regulatory requirements.
• The effectiveness of Origin's risk management framework and quantitative models.
• Origin's inability to receive dividends from Origin Bank and to service debt.
• The impact of labor pressures.
• Changes in Origin's operation or expansion strategy.
• Changes in management personnel.
• Origin's ability to maintain important customer relationships, reputation or otherwise avoid liquidity risks.
• Increasing costs as Origin grows deposits.
• Operational risks associated with Origin's business.
• Significant turbulence or a disruption in the capital or financial markets.
• Increased competition in the financial services industry.
• Compliance with governmental and regulatory requirements.
• Periodic changes to the extensive body of accounting rules and best practices.
• Further government intervention in the U.S. financial system.
• A deterioration of the credit rating for U.S. long-term sovereign debt.
• Origin's ability to comply with applicable capital and liquidity requirements.
• Natural disasters and other adverse weather events, pandemics, acts of terrorism, war, and other matters beyond Origin's control.
• Developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance.
• Fraud or misconduct by internal or external actors (including Origin employees).
• Cybersecurity threats or security breaches and the cost of defending against them.
• Origin's 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 aims to achieve a greater than 1% ROAA run rate by 4Q25 and ultimately reach top quartile ROAA through its 'Optimize Origin' initiative. The company expects midto high-single digit loan growth (excluding warehouse) and deposit growth, a NIM of 3.45% +/10 BPS, mid-single to high-single digit NII growth, flat to down low single digits noninterest income growth, and flat to down slightly noninterest expense growth. The tax rate is expected to be ~21.5%.

Management Comments

• 'Origin reported solid results for the quarter, and I am proud of how our bankers remain responsive to our customers and communities,' said Drake Mills, chairman, president and CEO of Origin Bancorp, Inc.
• Drake Mills stated that he is pleased with the overwhelming focus and commitment of employees on accomplishing the goals of 'Optimize Origin' and the progress made since its launch.

Industry Context

Origin Bancorp operates in a competitive financial services industry, facing competition from regional and national institutions, as well as fintech companies. The company's strategic investments in Texas and the Southeast, particularly in high-growth markets, position it to capitalize on favorable demographic and economic trends. The 'Optimize Origin' initiative reflects a proactive approach to enhancing efficiency and profitability in a changing environment.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or benchmarks.
• However, the company's stated goal of achieving top quartile ROAA suggests an aspiration to outperform its peers.
• The document mentions the KBW Nasdaq Bank Total Return Index, but does not provide a direct comparison of Origin's performance against this index for the current period.

Legal Proceedings

• The company is working toward a resolution in the matter of litigation against the bank brought in response to certain questioned activity involving a former banker in our East Texas market.

Stakeholder Impact

• Shareholders will benefit from the increased profitability and the declared dividend.
• Employees may be impacted by the 'Optimize Origin' initiative, which includes branch consolidation and headcount reduction.
• Customers should experience improved service and offerings as a result of the company's focus on productivity and delivery.
• The company's performance impacts the communities it serves through its commitment to relationship banking.

Next Steps

• The company will host an investor conference call and webcast on April 24, 2025, to discuss the first quarter 2025 results.
• The company will continue to implement and monitor the 'Optimize Origin' initiative.
• The company will pay a quarterly cash dividend on May 30, 2025.

Key Dates

Keywords

earnings, Origin Bancorp, net income, PTPP, ROAA, NIM, deposits, loans, dividend, financial performance, bank