Origin Bancorp Boosts Q4 2025 Margin Guidance to 3.70%

Origin Bancorp raises its margin guidance to 3.70% for Q4 2025 through balance sheet optimization. The company introduced "Optimize Origin," a plan to achieve a 1% ROA run rate by Q4 2025, with a focus on sustainably delivering leap-level financial performance.

Origin Bancorp, Inc. (OBK) has announced a significant increase in its margin guidance for the fourth quarter of 2025, raising it to 3.70% from the previously stated 3.50%. The company's CEO, Drake Mills, attributed this improvement to the successful implementation of "Optimize Origin," a strategic plan aimed at achieving a 1% return on assets (ROA) run rate by the end of the year. This plan focuses on sustainably delivering leap-level financial performance through a variety of efficiency and profitability initiatives.

Mills highlighted several key aspects of the "Optimize Origin" plan, including restructuring the mortgage business, optimizing the balance sheet, and enhancing the profitability of the commercial banking team. These efforts have resulted in an estimated $34 million in annual earnings improvement on a pretax, pre-provision basis. Additionally, the company's acquisition of a 20% stake in Argent Financial, which triggers the equity method of accounting, is expected to contribute an additional $6 million in income next year.

The company's CFO, William Wallace, reported that Origin Bancorp's net interest margin expanded by 17 basis points to 3.61% during the second quarter. He also announced that the company's margin guidance for the full year 2025 has been increased to 3.55%, with a potential variance of plus or minus 5 basis points. This guidance takes into account the expected 25 basis point Fed funds rate cuts in September and December.

Wallace emphasized that the company's loan and deposit declines on a year-to-date basis have led to a reduction in 2025 growth guidance to low single digits for both. However, the company remains optimistic about its ability to deliver improved returns ahead of schedule, driven by disciplined client selection, strategic investments, and a continued focus on ROA growth.

The company's Q&A session during the earnings call provided further insights into its strategic plans. When asked about the ramp in net interest margin, Wallace noted that tailwinds from loan and securities repricing are expected to continue. He also mentioned that the company's model now considers two Fed funds rate cuts, which could influence the margin guidance.

Hall, the President and CEO of Origin Bank, projected mid-single-digit annualized commercial growth for the back half of 2025 and mid- to high-single-digit growth for 2026. However, he emphasized the company's focus on ROA and disciplined growth.

The company's Chief Risk Officer, Jim Crotwell, reported that the company achieved approximately $50 million in additional desired reductions during the second quarter, bringing the total targeted reductions to approximately $250 million since the initiative began. He also noted that the company's total past due loans held for investment decreased to 0.88% at quarter end, compared to 0.96% for Q1 2025.

Overall, Origin Bancorp's Q2 2025 results and margin guidance reflect the company's commitment to balance sheet optimization and disciplined growth. The company's focus on ROA growth, margin expansion, and strategic investments positions it well to navigate the current economic environment and deliver improved returns to shareholders.

References:
[1] https://seekingalpha.com/news/4471948-origin-bancorp-raises-margin-guidance-to-3_70-percent-for-q4-2025-through-balance-sheet
[2] https://www.stocktitan.net/news/LRHC/la-rosa-holdings-corp-extinguishes-majority-of-outstanding-warrants-s2n24y2n77oe.html