Q1 2025 Origin Bancorp Inc Earnings Call
Operator: Your line is muted. Good morning, and welcome to the Origin Bancorp, Inc. first quarter earnings conference call.
Your line is muted.
Tom: Good morning, and welcome to the origin Bancorp, Inc. First quarter earnings Conference call. My name is Tom and I'll be your ever call coordinator. The format of the call includes prepared remarks from the company followed by question and answer session. All attendees will be on a listen only mode until the Q&A portion of the call. Please note. This event is being recorded I would now.
Operator: My name is Tom and I'll be your call 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&A portion of the call. Please note this event is being recorded.
Chris Reigelman: I would now like to turn the conference call over to Chris Reigelman, director of investor relations. Please go ahead.
Chris: Like to turn the conference call over to Chris <unk> Director of Investor Relations. Please go ahead.
Chris: 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 a slide presentation that we referred to during this call.
Chris Reigelman: 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. We'll have the slide presentation that we referred to during this call. Please refer to page 2 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 7 of our earnings release file with the SEC yesterday.
Chris: 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.
Chris: So those of you joining by phone. Please note. The slide presentation is available on our website at Www Dot IR Dot origin Dot Bank. Please also note that our safe Harbor statements are available on page seven of our earnings release filed with the SEC yesterday.
Chris Reigelman: All comments made during today's call are subject to the Safe Harbor Statements on our slide presentation and earnings release.
Chris: All comments made during today's call are subject to the safe Harbor statements in our slide presentation and earnings release.
Chris Reigelman: 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.
Speaker Change: I am 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 Brolly.
Speaker Change: And our chief credit and banking Officer Preston Moore. After the presentation, we will be happy to address any questions. You may have the call is yours.
Drake Mills: Drake, the call is yours. 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 world. 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 on accomplishing this goal and the progress we've made since launch.
Speaker Change: Thanks, Chris and thanks for being with US this morning.
Speaker Change: I am proud of the employees of origin their commitment to the strategic path. We're currently one 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.
Speaker Change: 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 on accomplishing. This go and the progress we've made since launch as we continue to communicate we expect these strategic actions that we've taken and we will continue to implement.
Drake Mills: 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 our 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 pre-tax earnings improvement of approximately $1.5 million, beginning in the second half.
Speaker Change: We will drive us to an ROI run rate of 1% or greater by the fourth quarter. This year, our ultimate target is ROI to be in the top quartile of at peers in.
Speaker Change: In the first quarter, we identified the next steps in reaching a run rate go 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 $1.5 million beginning in the second half of the year.
Speaker Change: I am 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 annualized ROA was 93 basis points. Our management team is focused on delivering results and I'm proud of how we started the year.
Drake Mills: I am 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.
Lance Hall: Now I'll turn it over to Lance and the team. Thanks, Drake, and good morning. As Drake mentioned, we remain laser-focused on Optimize Origin 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 a top financial I'm extremely encouraged with the passion and level of commitment our employees are showing for Optimize Origin throughout our market. 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.
Lance: Now I'll turn it over to Lance in the team.
Lance: Thanks, Jake and good morning.
Lance: As Greg mentioned, we remain laser focused on optimize origin and committed to delivering elite level of financial performance last.
Lance: Last quarter, we talked about origins, new internal performance statement, which properly aligns origins deep commitment to culture with a drive to be a top financial performer.
Lance: I am extremely encouraged with the passion and level of commitment our employees are showing for optimize origin throughout our markets.
Lance: 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 cultural celebration.
Lance Hall: 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 the world. 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.
Lance: This year, our fame was culture and performance.
Lance: And I saw firsthand the enthusiasm that our employees have towards our strategic path to be the best Bank in America.
Lance: This commitment to culture and performance was also reflected in our most recent all employee Microsoft Veeva, Glenn survey, which measures our culture compared to many of the top companies in the nation and around the world.
Lance: Oregon continues to show levels of employee engagement well within the global top 10% benchmark.
Lance: This speaks to the alignment of our employees have with our strategic direction.
Lance Hall: 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 bank. We have spoken often about core deposits being the driver of loan 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 the first quarter based on our outflows of public funds, but even with that seasonality, I was proud of our results this quarter as deposits, excluding brokered, grew 7.2% on an annualized basis.
Lance: As we work towards a near term goal of an ROE a run rate of 1% or greater by the fourth quarter of this year deposit and loan growth remain a priority for our bankers.
Lance: We have spoken often about core deposits being the driver of loan growth.
Lance: 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 here.
Lance: Historically, we have seen flat deposit growth in the first quarter based on our outflows of public funds, but even with that seasonality I was proud of our results this quarter as deposits. Excluding brokered grew seven 2% on an annualized basis.
Lance Hall: This sets us up well to fund the loan growth that we expect to see in the back half of 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 to our shareholders.
Lance: This sets us up well to fund the loan growth that we expect to see in the back half of the year.
Lance: I'm encouraged with what I'm hearing out of our markets as our pipelines continue to build.
Jim: We remain committed to deepening relationships with our customers that drive long term value to our shareholders now I'll turn it over to Jim.
Jim: Thanks Lance.
Jim Crotwell: 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.
Jim: As I've 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.
Jim: 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.
Jim Crotwell: 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 million in desired reductions, bringing the total targeted reductions to approximately $200 million 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 12-31, and were comparable to levels reported for Q2 2024. Of the $30 million increase in past dues, $2.1 million has already paid off in full, $16.5 million is anticipated to be paid off in the near term, and a $5.2 million renewal is pending.
Jim: 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.
Jim: During the first quarter, we achieved approximately $50 million and desired reductions, bringing the total targeted reductions to approximately $200 million over the past four quarters. We continue to believe that this optimization of our portfolio will serve us well moving forward.
Jim: Past due loans held for investment came in at point, 96% at quarter end up from five 6% as of 12 31 and were comparable to levels reported for Q2 2024.
Jim: Of the $30 million increase in past dues $2 $1 million has already paid off in full $16.5 million is anticipated to be paid off in the near term and a $5 2 million dollar renewal is pending.
Jim: Classified loans increased $8 $9 million to 168% from $1 five 7% of loans as of December 31st while nonperforming loans increased $6 $4 million for the quarter to one point up 7% from nine 9%.
Jim Crotwell: Classified loans increased $8.9 million to 1.68% from 1.57% of loans as of Dec. 31, while non-performing loans increased $6.4 million for the quarter to 1.07% from 0.99%. The increase in classified loans was primarily driven by four relationships totaling $17.4 million, which were partially offset by the payoff of two classified credits totaling $6.3 million. As to nonaccruals, the increase was primarily driven by two relationships, partially offset by the payoff of one previous nonaccrual loan. Net charge-offs for the quarter came in at $2.7 million, net of $2.1 million in recovery. On an annualized basis, net charge-offs were 0.15%, which was better than our expectations.
Jim: The increase in classified loans was primarily driven by four relationships totaling $17 $4 million, which were partially offset by the payoff of two classified credits totaling $6 $3 million.
Jim: As to non accruals. The increase was primarily driven by two relationships, partially offset by the pay off of one previous nonaccrual loan.
Jim: Net charge offs for the quarter came in at $2 $7 million net of $2 $1 million in recoveries.
Jim: On an annualized basis net charge offs were one 5%, which was better than our expectations.
Jim Crotwell: On a percentage basis, our allowance increased from 1.25% to 1.28% net of mortgage warehouse.
Jim: On a percentage basis, our allowance increase from 1.25% to one point to 8% net of mortgage warehouse in late 2022, we began focusing on the Moody's as two scenario as the basis for our economic forecast within our CSO model.
Jim Crotwell: In late 2022, we began focusing on the Moody's S2 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.
Jim: For some time this scenario has called for a mild recession beginning the quarter. Following the report date and lasting three quarters.
Jim: Since we are focused on this scenario for some time, we did not experience any significant changes in our CSO model for this quarter since current economic headwinds are essentially factored into this scenario.
Jim: Lastly, as to ADC in 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.
Jim Crotwell: 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 to 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.
Jim: We continue to be well positioned to support our customers and provide strategic growth.
Wally Wallace: I'll now turn it over to Wallace. Thanks, Jim. And good morning, everyone.
Wally: I'll now turn it over to Wally.
Thanks, Jim and good morning, everyone.
Wally Wallace: Turning to the financial highlights, in Q1, we reported diluted earnings per share of 71 cents. As you can see on slide 26, the combined financial impact of notable items during the quarter equated to a net expense of $2.3 million, equivalent to $0.06 in EPS pressure. On the balance sheet side, deposits were up 1.4% during the quarter, and excluding brokered, deposits grew 1.8% linked. 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 million, the lowest level since the fourth quarter of 2022.
Wally: Turning to the financial highlights in Q1, we reported diluted earnings per share of <unk> 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 $3 million equivalent to six cents and EPS pressure.
Wally: On the balance sheet side deposits were up one 4% during the quarter and excluding brokered deposits grew one 8% linked quarter.
Wally: We're able to use excess liquidity to allow brokered deposits to continue rolling off our balance sheet with broker deposits declining to just $50 million the lowest level since the fourth quarter of 2022, while.
Wally Wallace: While non-interest 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 2020. As a percent of total deposits, non-interest bearing deposits remain stable at about 23 percent and we continue to anticipate they will remain in the 22 to 23 percent 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.
Wally: While noninterest bearing deposits declined 0.6% sequentially. We attribute this decline to normal seasonality importantly on a year over year basis noninterest bearing deposits were up slightly the first quarter of year over year growth also since the fourth quarter of 'twenty two.
Wally: 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.
Wally: Our loan to deposit ratio, excluding mortgage warehouse remains below our 90% target at 86, 1% and.
Wally: And our deposit and liquidity trends remained strong.
Wally: Given the strong deposit trends, we have experienced over the past year, our bankers across our markets remain focused on growth as.
Wally Wallace: 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 rate. Turning to the income statement, net interest margin expanded 11 basis points during the quarter to 3.44 percent, ahead of our expectations as both loan yields and deposit costs were better than anticipated. We remain pleased that deposit costs continue to trend in line with our historical beta trends and loan pricing remains disciplined across our market. Moving forward, as you can see in our outlook on slide 4, due primarily to a higher starting point in 2Q25, we increased our margin guidance by 5 basis points to 3.50% in 4Q25 and 3.45% for the full year, plus or minus 10 basis points.
Wally: 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.
Wally: Turning to the income statement net interest margin expanded 11 basis points during the quarter to 344% ahead of our expectations as both loan yields and deposit costs were better than anticipated.
Wally: We remain pleased that deposit costs continue to trend in line with our historical beta trends and loan pricing remains disciplined across our markets.
Wally: Moving forward as you can see in our outlook on slide four due primarily to a higher starting point in <unk> 'twenty five we increased our margin guidance by five basis points to 3.50% and <unk> 25, and 3.45% for the full year, plus or minus 10 basis points.
Wally Wallace: 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.
Wally: Our underlying fed rate cut yield curve and deposit beta assumptions remain unchanged from prior guidance and our modeling higher margin expectations offset the impact of moving our loan growth to the lower end of the range.
Wally Wallace: Shifting to non-interest income, we reported $15.6 million in Q1. Excluding $144,000 in net benefits from notable items in Q1 and $14.4 million in net pressures in Q4, non-interest income increased to $15.5 million from $14.1 million in Q4, due primarily to normal seasonality in our insurance business with seasonality in our mortgage business as a partial 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.
Wally: Shifting to noninterest income, we reported $15 $6 million in Q1, excluding 144000 and net benefits from notable items in Q1, and $14 4 million in net pressures in Q4, noninterest income increased to $15 $5 million from $14 $1 million in Q.
Wally: Q4, due primarily to normal seasonality in our insurance business with seasonality in our mortgage business as a partial offset.
Wally: Notably with the changes in our mortgage business as discussed in drinks remarks, we anticipate our noninterest income run rate will be 400 to $500000 lower on a quarterly basis beginning in <unk>.
Wally Wallace: Our non-interest expense decreased to $62.1 million in Q1 from $65.4 million in Q4. Excluding $2.1 million of notable items in Q1 and $3.5 million in Q4, non-interest expense declined to $60.0 million from $61.9 million 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 pressure. 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.
Wally: Our noninterest expense decreased to $62 $1 million in Q1 from $65 $4 million in Q4 <unk>.
Wally: Excluding $2 1 million of notable items in Q1, and $3 $5 million in Q4, noninterest expense declined to $60.0 million from $61 $9 million in Q4.
Wally: Well optimize origin efforts undertaken in Q4 benefited Q1 expense as expected Q1 expense was better than we anticipated due to additional optimize origin benefits, a lower regulatory assessment base and a lower franchise tax rate among other benefits with minimal offsetting pressures we.
Wally: An increase in our <unk> expense run rate compared to <unk>, however, with the anticipated changes to our mortgage business as previously discussed we expect our run rate excluding notable items to decline beginning in Q3.
Wally Wallace: We are reducing our guidance for year-over-year non-interest expense to be down low single digits in 4-2-25 and flat to down slightly for the full year 2020.
Wally: We are reducing our guidance for year over year noninterest expense to be down low single digits in <unk> 25, and flat to down slightly for the full year 2025.
Wally Wallace: Lastly, turning to capital, we note that Q1 tangible book value grew sequentially to $32.43, the tenth consecutive quarter of Leeds Quarter growth, and the TCE ratio ended the quarter at 10.6 percent, up from 10.3 percent 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 capital. 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.
Wally: Lastly.
Wally: Turning to capital we note that Q1 tangible book value grew sequentially to $32 43.
Wally: The 10th consecutive quarter of linked quarter growth and.
Wally: And the TCE ratio ended the quarter at 10, 6% up from 10, 3% in Q4.
Wally: 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.
Wally: 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 to Drake.
Drake Mills: With that, I will turn it back to. Thanks Wally. I'm encouraged by the position our company is in and the progress we are making as we optimize Origin.
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 relationship as we understand how current conditions are impacting their businesses in my past uncertainty has created opportunities.
Drake Mills: With the uncertainty in the markets, we are focused on our relationships as we understand how current conditions are impacting their business. 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.
Drake: <unk> is blessed with the strength capacity and people to enhance profitable relationships that fit our risk profile.
Drake Mills: I sincerely thank each of you for your interest and support of Origin Bancorp.
Drake: Sincerely. Thank each of you for your interest and support of origin Bancorp, We will open it up for questions.
Operator: We'll open it up for questions.
Drake: Thank you team.
Operator: Thank you, team. Ladies and gentlemen, at this time, we will conduct the question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad to enter the you've joined via web. Please press the raise hand icon on the right side of your dear brooches. Again, that's star 1 on your telephone keypad, or the raise hand icon on the right side of your dear Rocha's phone.
Speaker Change: Ladies and gentlemen at this time, we will conduct the question and answer session if.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad to enter the queue.
Speaker Change: If you've joined via web. Please press the <unk> hand icon on the right side of beauty approaches screen.
Speaker Change: Again, Thats star one on your telephone keypad or the raise hand icon to the right side of your tier Rojo screen.
Operator: We will pause here briefly to allow any questions to generate Our first question comes from Matt with.
Speaker Change: We will pause briefly to allow any questions to generate.
Nick: Our first question comes from Nick <unk> with Stephens.
Matt: Matt, your line is open. You may proceed. Hey, great. Thanks.
Speaker Change: Your line is open you May proceed.
Nick: Great. Thanks, good morning, everybody.
Matt: Good morning, everybody. Good morning, Matt. I'll 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 that 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?
Speaker Change: Good morning, Matt.
Speaker Change: I'll start on the loan growth front and it sounds like you still have some optimism on growing loan balances I think Lan 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 <unk>.
Speaker Change: Of your previous guidance, so kind of that mid single digit range, if I heard that right.
Speaker Change: 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.
Matt: 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. Thanks.
Speaker Change: 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. Thanks.
Speaker Change: Yeah, Hey, Matt. This is lance great question I'll start it with US and then drank might want to jump in and kind of them from the conversations you're having with clients and bankers in the market then I'll, let Jim talk about.
Lance Hall: Yeah, hey, Mathis Lance, great question. I'll start it with it.
Lance Hall: 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 yeah, so obviously, with, you know, 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. 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.
Speaker Change: And any headwinds, but yes, so obviously with.
Speaker Change: Macroeconomic and tariff questions, we weren't even deeper the last.
Speaker Change: A 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.
Speaker Change: First our <unk>.
Speaker Change: Bankers were really energized right, now Oh, and calling efforts and relationship building.
Speaker Change: As we've talked about in the past staying under 10 B was.
Speaker Change: Little more painful than I would've thought it was going to be especially around sort of holding back on CRE.
Lance Hall: 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 90 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 numbers somewhat.
Speaker Change: So as we kind of went around to all of our markets in Q1 due on our annual kickoff and talking about strategic planning and goals.
Speaker Change: Real energy.
Speaker Change: Sort of getting back out and being proactive in the market, which is which is really awesome.
Speaker Change:
Speaker Change: We spent a lot of time with the President's sort of modeling up with the next 90 days look like what the end of the year looks like.
Speaker Change: We are seeing pipelines building nicely I can 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 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 numbers somewhat.
Lance Hall: So if I look at a pipeline for the next quarter, it's really in line with where our budget was. Now, we're realistic, too, and 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 to 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.
Speaker Change: So as I look at our pipeline for the next quarter, it's really in line with where our budget was.
Speaker Change: Now we're realistic too.
Speaker Change: 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 to be looking at with cost around lumber and steel and other inputs.
Speaker Change: Trying to be.
Speaker Change: Thoughtful around where we see growth.
Speaker Change: But to say that we are optimistic that we'd get back to sort of origin levels of growth in the.
Speaker Change: Near term is something I firmly believe in.
Matt: Hey, Matt this strike.
Drake Mills: 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 annual experiences with how business is going, how tariffs are impacting business. It's been pretty interesting as I summarize the last order 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.
Matt: As you know it's been a tremendous amount of time in the markets in front of our clients our relationship managers quarterly publish.
Matt: <unk> experiences with how business is going how tariffs are impacting business than.
Matt: It's been pretty interesting as a summarized.
Matt: The last quarter of visits information and evidence of what is the oil in the market.
Matt: It would tell you Budd.
Matt: Just listening to.
Matt: External sources that uncertainty has certainly been negative, but as I put this together and it is difficult to sit here and say.
Drake Mills: 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.
Matt: Im 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 the type of projects. We're looking at that we can.
Matt: 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: And Matt This is Jim good morning.
Jim Crotwell: Matt, this is Jim. Good morning. As to our, our Plant Selection Project, I think it's gone really, really well. As you heard me say, that we've now exited about $200 million. 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 I feel very, very pleased with what we've accomplished today. Okay, great.
Matt: As to R. R.
Matt: Plant selection project.
Matt: It's gone really really well as you heard me say that we've now exited about $200 million and I would say, we're probably in the seventh inning.
Matt: Getting into the seventh inning stretch on that project, so have a little bit more that will be focused on but feel very very pleased with what we've accomplished to date.
Speaker Change: Okay, great well I appreciate all the commentary on the loan growth question, and then I guess moving over to the optimize origin discussion.
Matt: Well, appreciate all the commentary on the loan growth question.
Matt: And then I guess moving over to the optimized origin discussion. I think last time in January, we discussed annualized benefits around $20 million, and now we've moved this up to $23 million. Great to see this.
Speaker Change: Last time in January we discussed annualized benefits around $20 million and now we've moved this up to $23 million a great to see this just would love to hear any discussion about.
Matt: 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 just reinvested into the platform.
Speaker Change: How much of this incremental savings, we would drop to the bottom line versus how much of the incremental savings that we're seeing would be reinvested into the platform.
Speaker Change: Okay.
Matt: Hey, Matt.
Wally Wallace: Hey, Matt. I think you can 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, etc.
Matt: I think you can you can look at our guidance for the fourth quarter.
Matt: Year over year expense run rate to be down.
Matt: The low single digits range, which is.
Matt: A.
Matt: Better guide than what we gave last quarter to get a sense of how much. We think flows through we are.
Matt: Being extraordinary extraordinarily thoughtful on every incremental dollar that we invest.
Matt: And I think you can see in our guide that we anticipate pulling pulling a decent portion of that down to the bottom line, but we are not going to.
Matt: Pull back on investment opportunities that come our way.
Matt: From the standpoint of.
Matt: Good hires.
Matt: Good technology spend et cetera, so we're being very cognizant not to cut to the bone.
Matt: So we're being very cognizant not to cut to the bone but to trim. Yeah, okay.
Matt: But to trim.
Speaker Change: Yeah, Okay. Thanks to that Wally and then maybe just another one for for a while and maybe kind of a tag team with Lance.
Matt: Thanks for that, Wally.
Matt: 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. We'd 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 cycles now close to 80%. I think the guidance still assumes two more rate cuts to back half the year.
Speaker Change: Interest bearing deposit costs, we saw a really nice move lower in the first quarter, which was great to see.
Speaker Change: Would love just to hear your overall take on deposit pricing competition in the in the markets how much how much pushback that you get from the customers that you brought down those deposit costs any surprises.
Speaker Change: And then I think the cumulative beta on your.
Stefan: Deposits interest bearing deposits Stefan the cycles now close to 80%.
Stefan: 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.
Wally Wallace: Would love to hear just kind of your assumptions and thoughts about those betas in the back half of the year.
Stefan: Those betas in the back half of the year.
Stefan: Yeah.
Matt: Yeah, Yeah, I'll take the narrative part first it's been interesting Matt I think we've done a really good job of communicating with our customers and our value proposition and walking through this the presidents have been really proactive.
Wally Wallace: Yeah, yeah, I'll take the narrative part first. It's been interesting, Matt. I think we've done a really good job of communicating with our 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. You know, 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.
Matt: I will say that I've been somewhat surprised in the competition.
Matt: We have seen even in the last two weeks from CD specials, and our markets that are dramatically higher than I would've thought.
Matt:
Matt: We're really focused kind of on the money market business and sort of how that we can operate there.
Matt: So we've been able to do this very effectively.
Wally Wallace: 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. And Matt, I'll just add on the beta side, for our modeling right now, where we discuss two rate cuts modeled, 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.
Matt: I'm, obviously mindful of what competition is doing but were also mindful of.
Matt: Projected rate cuts and wanting 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.
Matt: Hopefully aligned with it maybe even prior to the next rate cut.
Matt: And Matt I'll, just add on the beta side.
Matt: For for our modeling right now where we discuss.
Matt: Two two rate cuts modeled we still assume our historical betas holds.
Matt: When we look at various rate scenarios, where perhaps there's more cuts than we have in our models. We do we do tend to ratchet down our beta assumptions.
Matt: With the assumption that as we get further in the cycle.
Matt: There's going to be less for lack of a better term low hanging fruit on the deposit beta side.
Wally Wallace: 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, you know, if... 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.
Matt: That said, you'll you'll note that even though we in our own modeling took our loan growth assumption is down to the lower end of the guided range. We just took our net interest margin guidance up.
Matt: And I would just say that.
Matt: If if.
Matt: 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.
Matt: Loan growth come in.
Matt: The higher end of the range that could create a.
Matt: I need to bring in more deposits at higher cost so perhaps the NIM comps slightly.
Matt: Lower than our models.
Wally Wallace: However, net-net, the net interest income expectations still increase in that scenario. So we feel pretty good about the deposit data, and we try to be cognizant of the puts and takes on that. relative to Fed cuts and loan growth.
Matt: However, net net the net interest income expectations still increase in that scenario. So we feel pretty good about the deposit betas.
Matt: Try to be cognizant of the puts and takes on that.
Matt: Relative to fed cuts and loan growth.
Matt: Yeah, Okay makes sense, while I appreciate that.
Wally Wallace: Yeah, okay. Makes sense, Wally. Appreciate that.
Matt: That's it for me, guys.
Matt: That's it for me guys I'll step back thank you.
Operator: I'll step back. Thank you. Thank you, Matt.
unknown: Thank you Matt.
Tim: Our next question comes from Tim with Raymond James.
Tim: Our next question comes from Tim with Raymond James. Tim, your line is open, you may proceed. 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 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. Yeah, it's interesting. Kind of 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.
Speaker Change: Tim Your line is open you May proceed.
Tim: Hey, good morning, everyone.
Speaker Change: Thanks for taking my question.
Speaker Change: I just wanted to follow up on loan growth and just your thoughts on payoffs in commercial real estate declined a little bit this quarter.
Speaker Change: <unk> heard from some other banks that come.
Speaker Change: 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.
Speaker Change: Yes, its interesting and kind of in the conversations.
Speaker Change: Do you understand it's just the uncertainty from a macro level does give pause to customers, but it really is kind of industry specific.
Tim: So we were kind of looking at, you know, revolvers, looking at what we're seeing in sort of project timelines. We've seen a little bit more utilization in our C&I operating lines, and we're actually starting to hear some C&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.
Speaker Change: We were kind of looking at revolver looking at.
Speaker Change: What we're seeing and sort of project timelines.
Speaker Change: We've seen a little bit more utilization in our C&I.
Speaker Change: Operating lines and we're actually starting to hear some C&I clients talk about potential inventory builds to get ahead of projected cost increases on their inputs, which is interesting.
Speaker Change: And again, it really kind of depends on the industry on what theyre 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 onboard so little bit of a mixed bag right now.
Tim: So a little bit of a mixed bag right now.
Tim: 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.
Speaker Change: Luckily for us our footprint is such a advantage for us in that.
Speaker Change: There's still so much migration into Texas and the southeast that those two specifically kind of continue to create opportunity just from from.
Speaker Change: Gains of people moving in gains of economic growth.
Speaker Change: Got it and then.
Tim: Got it.
Tim: And then, if you could just give us an update on the hiring efforts and any opportunities you're seeing and then, you know, any update to the Panhandle South Alabama team and, you know, how they're progressing and any updated expectations for them this year.
Speaker Change: If you could just give us any update.
Speaker Change: On the hiring efforts.
Speaker Change: Opportunities, you're seeing and then any update to the.
Speaker Change: The Panhandle, South, Alabama team and how theyre progressing and any updated expectations. This year.
Speaker Change: Yeah be glad to so obviously.
Drake Mills: Yeah, be glad to. So obviously... Strategic hires, whether you turn that lift outs or individuals, is one of the key strategic drivers of Origin. It's been that way for 20 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&I backgrounds and banking teams. So for us, you know, 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.
Speaker Change: Strategic hires whether you turn that lift outs or individuals is one of the key strategic drivers of origin as it's been that way for 20 years.
Speaker Change: We build our foundation and our geographic management model. So that we could take take advantage of any dislocation or opportunities.
Speaker Change: So we are actively looking at hiring of really productive commercial bankers, specifically with C&I backgrounds and banking teams.
Speaker Change: So for US we have.
Speaker Change: <unk> head count pretty significantly over the last year through optimized.
Speaker Change: That was never the intention of simply just reducing that expense. It was creating capacity. So that we could reduce low performers and reinvest in high banking team. So we are actively having conversations north Texas specifically.
Drake Mills: 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. 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.
Speaker Change: 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 deposits.
Speaker Change: They actually have the lowest deposit costs right aligned with Louisiana.
Speaker Change: So super pleased where we are there midnight new payment in the southeast are producing right in line with what they thought from a budget perspective.
Speaker Change: We expect a nice growth in the second half of the year from them, we've got a really strong pipeline in the southeast and.
Drake Mills: We've got a really strong pipeline in the Southeast.
Drake Mills: 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.
Speaker Change: <unk> spent a lot of time.
Speaker Change: Down in mobile a few weeks ago in understanding the impact that the port is having the.
Speaker Change: 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 where a year ago.
Speaker Change: Okay.
Speaker Change: That's great to hear.
Tim: 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.
Speaker Change: And one last one on fees and the reduced outlook.
Speaker Change: Obviously mortgage saw some pressure this quarter, but the swap income was actually up pretty nicely just any thoughts around those two items.
Wally Wallace: Just any thoughts around those two items and the drivers of the reduced outlook? Yes, so you probably saw in the 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 optimized origin. We've really been focusing on that aspect of our business, and we feel like there could be some opportunity there.
Speaker Change: Drivers of the reduced outlook.
Speaker Change: Yes so.
Speaker Change: You probably saw in our earnings release and heard in <unk> commentary that we've.
Speaker Change: Restructured our mortgage segment and the new model.
Speaker Change: Well result, and a meaningfully lower expense space, but with that we also.
Speaker Change: We'll have some pressure on the revenue side of the equation.
Speaker Change: That's the that's the biggest driver of the change in the guidance you did mentioned 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.
Speaker Change: Hopefully, we're conservative in our guidance on that side.
Wally Wallace: Hopefully, we're conservative in our guidance on that side.
Speaker Change: And then also you'll note that we did have some pressures in the first quarter around some of our LP investment so.
Tim: And then also, you'll note that we did have some pressures in the first quarter around 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. Got it. All right. Thanks for taking my question. Tim, thank you. Thank you again, Tim.
Speaker Change: Assuming that that's more onetime in nature there.
Speaker Change: Or some sort.
Speaker Change: Tailwind to offset the headwinds that come with the mortgage.
Speaker Change: Restructuring on the revenue side.
Speaker Change: Got it alright, thanks for taking my questions.
Tim: Tim Thank you.
Speaker Change: Okay.
Speaker Change: Thank you again Tim.
Mark: Our next question comes from Mark with K B W.
Mark: Our next question comes from Mark with KBW. Mark, your line is open. Hey guys, good morning. Good morning, Mark.
Speaker Change: Mark Your line is open you May proceed.
Mark: Hey, guys good morning.
Speaker Change: Good morning, Mark.
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 billion threshold and potentially crossing that this year? Yeah, we we have an ongoing conversations around crossing that threshold. But, you know, for us, it's I think we have purposely created the environment to go over 10b.
Mark: Yes. So you noted that obviously theres been some pent up demand and bankers are energized.
Speaker Change: Pipelines look strong.
Speaker Change: But.
Speaker Change: The sort of macro headwinds to growth remain in the industry.
Speaker Change: Does that change how you guys think about the $10 billion threshold.
Speaker Change: Potentially crossing out this year.
Speaker Change: Yes.
Speaker Change: We have an ongoing conversations around.
Speaker Change: Crossing that debt.
Speaker Change: Hold but for us it's.
Speaker Change: I think we have purposely created the environment to go over 10, B I would say that if we do see significant negative impact of markets and we see pullbacks or lack of growth and we.
Mark: 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 will see growth and what we expect these pipelines to do will actually happen. Again, it is teetering, but it is time for us to move forward and grow. Unless the wheels come off of it, I expect that is what is going to happen.
Speaker Change: Our sitting close to that line in the end of the fourth quarter. It definitely makes sense for us to pull back and not crossed that line but.
Speaker Change: Our intentions are as we speak to continue to drive.
Speaker Change: With an optimistic approach that we will see growth in what we expect these pipelines to do will actually happen. So.
Speaker Change: Again, it's tater and but it's time for us to move forward and grow.
Speaker Change: Unless the wheels come off of it I expect us what's going to happen.
Speaker Change: Yes that makes sense.
Mark: Yep, that makes sense.
Mark: And so I guess switching gears, I know organic growth is the focus, but capital is strong.
Speaker Change: And so I guess switching gears I know organic growth is the focus but capital is strong.
Drake Mills: Is there any interest in using the share buyback at these levels? Absolutely. I think it's a bargain as we speak, and I'm confident in it, and I think you'll see some activity.
Speaker Change: Is there any interest in using the share buyback at these levels.
Speaker Change: Absolutely.
Speaker Change: I think it's.
Speaker Change: It's a bargain as we speak and I'm confident.
Speaker Change: And in it and I think Youll see some activity, we also and I want to remind.
Drake Mills: We also, and I want to remind I can tell you that we have opportunities to utilize capital with a call of sub-debt in November, that's about $75 million, 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. Got it.
Speaker Change: You that we have opportunities you have lot of capital with.
Speaker Change: A call of sub debt in November that's about $75 million. So we'll be planning on heading that direction.
Speaker Change: Extremely helpful to the run rate so that's going to be a utilization of capital also but expect to see some repurchase activity.
Speaker Change: Got it. Thanks, that's it for me guys I appreciate it.
Mark: Thanks.
Mark: Well, that's it for me, guys. Appreciate it. Thank you.
Speaker Change: Thank you again mark.
Operator: Thank you again, Mark.
Speaker Change: Our next question comes from Manuel with da Davidson.
Manuel: Our next question comes from Manuel with D.A. Manuel, your line is open, you may proceed. Hey, I appreciate the commentary on the 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? Yeah, I'll say maybe the wall you can see from his chair, but I've been real pleased with where we're seeing loan yields and still everything coming in kind of the 7.3 to 7.5 range. I haven't seen. banks acting crazy in that regard.
Speaker Change: Your line is open you May proceed.
Manuel: Hey, I appreciate the commentary on <unk>.
Speaker Change: Competition on deposit side.
Speaker Change: Maybe you said it but how.
Manuel: Are you seeing.
Manuel: New loan yields come in and is there any change on the competition on the lending side on the pricing.
Manuel: Yeah, I'll start and maybe even while I can see from his chair, but I've I've been real pleased with where we're seeing loan yields its still versus everything coming in kind of the seven 3% to seven five range.
Manuel: I haven't seen.
Manuel: Banks acting crazy in that regard so.
Manuel: So it's been more a little bit on the deposit side that I've scratched my head on.
Manuel: It's been more a little bit on the deposit side that I'm scratching my head on so.
Manuel: So I've been pleased with where our bankers are and where our competition is on loaning. In the commentary before on the deposit side, that was more CDs, not in the money market side? Was that the key differentiator there? Yeah, just what we've been seeing from a competition perspective, there's been marketing in Texas and North Louisiana, Mississippi, really on the CD side. And I'll say, I'm just, you know, 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.
Manuel: I've been pleased with where our bankers are and where our competition is on loan yields.
Manuel: And the commentary before on the deposit side that was more Cds, not and you're not in the money market side.
Manuel: The key differentiator there.
Manuel: Yes, Jeff what we've been what we've been seeing from a competition perspective, that's been marketing in Texas, and North, Louisiana, Mississippi is really on the CD side and then I'll.
Speaker Change: Sorry, Im 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.
Manuel: 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 the last 12 months, we've actually grown our deposits in those areas by about $550 million, which has then been a direct offset to reducing broker deposits by $550 million. So that's been a nice lift to NIM, help on deposit costs, but really just to focus on relationships and positioning our balance sheet in a better way. Okay. I appreciate that.
Speaker Change: And our base have been relatively flat, but if you look at money market and demand for us year over year in the last 12 months, we've actually grown.
Our deposits in those areas by about $550 million, which has been been a direct offset to reducing broker deposits about $550 million. So.
Speaker Change: That's been a nice lift in NIM.
Speaker Change: Help on deposit costs, but really just a focus on relationships and positioning our balance sheet in a better way.
Speaker Change: Okay. Okay I appreciate that.
Drake Mills: On a somewhat different topic, The to-be-decided pieces of the Optimize Origin initiative, can you kind of give updates there around Argent? Yep, we'll be glad to hear from you. Yeah, sure. Well, thank you. Yeah. 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 what we're going to call a 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.
Speaker Change: Somewhat different topic.
Speaker Change: To be decided pieces of the optimize origin.
Speaker Change:
Speaker Change: Initiative can you kind of give updates there around margin.
Speaker Change: Yes, let me go through a department that is smartphone.
Speaker Change: Yeah sure well. Thank you, yes, so as we talked about the levers last time, obviously it was mortgage one.
Speaker Change: And obviously, where you know.
Speaker Change: We've announced that internally to our people this week.
Speaker Change: That'll be a significant reduction in expense as we change and what were kind of call a community mortgage partnership model.
Speaker Change: And really sort of taken the fixed price of the manufacturing process out of the mortgage business on IAA and really supporting our MLR rose.
Speaker Change: Enhancing our private banking delivery.
Speaker Change: But really and also supporting our communities that need a mortgage but do it in a much more efficient and effective way.
Drake Mills: Number two is Argent. We are at 19.5% ownership. and 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 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.
Speaker Change: Number two is origin, we are at 19, 5% ownership in.
Speaker Change: And that regional.
Speaker Change: Wealth firm.
Speaker Change:
Speaker Change: They actually so that they get an annual valuation on their share price from a third party, we're expecting that in the next two weeks.
Speaker Change: My anticipation would be that that valuation would trigger some potential sellers that would give us the opportunity at that point to get above.
Speaker Change: 20%. So my expectation would be that's something that we'll be talking about in the next quarter, which is which is really exciting based on their trajectory.
Speaker Change: They're doing a really good job of growing assets and seeing nice trends in there about the growth.
Drake Mills: and their revenue growth. So really continue to be really optimistic on what Origin's doing in our partnership there.
Speaker Change: And their revenue growth, so really continue to be really optimistic on what origin is doing and our partnership there.
Drake Mills: 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 improvement. So... continue to focus. very look very closely at all those opportunities as we really really push in this optimized That's really helpful.
Speaker Change: And then we continue to work with our third party <unk>.
Speaker Change: Sultan on efficiency and process management projects, we've identified a few first steps that we're working through.
Speaker Change: We think theres going to be some meaning meaningful results that come out of there.
Speaker Change: But both on the revenue side when it comes to cards and treasury as well as efficiencies on some process improvement so we.
Speaker Change: We continue to focus.
Speaker Change: Very look very closely at all of those opportunities as we really really pushing this optimized.
Speaker Change: That's really helpful. Just briefly on the.
Manuel: Just briefly on the, if you, you know, there's a lot of Uncertainty here, nothing is guaranteed, but if you were able to get Origin above that 20% level, that should benefit fees. Is that in your guidance at the moment? We're not putting anything that we haven't. quantified in the guide, and you'll also know. Okay, I appreciate that. Thank you very much. Thank you again, Manuel.
Speaker Change: If you would.
Speaker Change: There's a lot of.
Speaker Change: Uncertainty here nothing is guaranteed but if you were able to.
Speaker Change: Get origin above that 20% level.
Speaker Change: That should benefit fees is that in your guidance at the moment.
Speaker Change: We're not answers, we're not putting anything that we haven't.
Speaker Change: Quantified and the guide.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Appreciate that.
Speaker Change: Thank you very much.
Speaker Change: Thank you again Manuel.
Speaker Change: This concludes the Q&A and to get back to Drake Mills for any final remarks.
Drake Mills: This concludes the Q&A. I'm handing it back to Drake Mills for any final remarks.
Drake Mills: You know, 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 in 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 market. And we are in position to do just that. Historically, we've experienced our best growth during these times, I think back to 2008 and through those years.
Drake Mills: 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 a witness our progress in enhancing our culture and our performance.
Drake Mills: When I say the level of commitment by our employees to perform with energy and optimism.
Drake Mills: It reinforces that uncertainty creates opportunity if youre in a position to take advantage of the market.
Drake Mills: And we are in position to do just that historically, we've experienced our best growth. During these times I think back to 2008 and through those years, So I am.
Drake Mills: So I am. remaining optimistic. I do think that our client base, I think our footprint are positive as we move forward.
Drake Mills: Remaining optimistic.
Drake Mills: 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'll look forward to seeing each of you in the future. Thank you.
Drake Mills: 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.
Drake Mills: Ladies and gentlemen, this concludes today's call. Thank you and have a great day.
Operator: Ladies and gentlemen, this concludes today's EPR call. Thank you, and have a great day. The host has ended this call.
Drake Mills: The host has ended this call good.
Operator: Goodbye.