Q2 2025 Origin Bancorp Inc Earnings Call

Drake Mills: early stages of development. We believe this structure change can enhance our speed, responsiveness, and nimbleness around delivery to our clients, more effectively utilize technology, create scalable processes, improve efficiencies, and ultimately drive growth and profitability. An important part of Optimize Origin has been to better utilize data to improve strategic decision-making. This has been seen through our branch efficiency, banker profitability, and the restructuring of our mortgage.

We believe this structure change can enhance our speed responsiveness and nimbleness around delivery to our clients more effectively utilize technology.

<unk> scalable processes improve efficiencies and ultimately drive growth and profitability.

An important part of optimize origin has been to better utilize data to improve strategic decision making.

This has been seen through our branch efficiency banker profitability and the restructuring of our mortgage business.

Drake Mills: Additionally, we are in the early stages of a large plan to centralize data within our organization to improve processes and outputs throughout our company. There are multiple strategic projects underway that should result in lower expenses and increased revenue. So far, we have identified approximately $4 to $5 million of annualized pre-tax earning benefits from these projects. I'm proud of our team and their commitment toward embracing optimized or I'm confident that we have the right focus as we head into the second half of the year.

Additionally, we are in the early stages of a large plan to centralize the data within our organization to improve processes and outputs throughout our company.

There are multiple strategic projects underway that should result in lower expenses and increased revenue.

So far we have identified approximately $4 million to $5 million of annualized pretax earnings benefits from these projects.

I am proud of our team and their commitment toward embracing optimize origin I'm confident that we have the right focus as we head into the second half of the year now I'll turn it over to Jim.

Jim: Now, I'll turn it over to Jim. Thanks, Lance.

Jim: Thanks Lance.

Jim: As I have shared on prior calls, 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 second quarter, we achieved approximately $50 million in additional desired reductions, bringing the total targeted reductions to approximately $250 million since we began this initiative. While this has been a headwind to portfolio growth, this optimization of our portfolio will serve us well moving forward. Total past due loans held for investment decreased to 0.88% at quarter end compared to 0.96% for Q1 2025. Classified loans as percent of total loans were stable for the quarter, decreasing to 1.66% at quarter end from 1.68% as of March 31st.

Jim: As I've shared on prior calls beginning the second quarter of last year, we began to proactively exit relationships that were determined to not fit our client selection criteria during.

Jim: During the second quarter, we achieved approximately $50 million and additional desired reductions, bringing the total targeted reductions to approximately $250 million. Since we began this initiative.

Jim: While this has been a headwind to portfolio growth. This optimization of our portfolio will serve us well moving forward.

Jim: Total past due loans held for investment decreased to eight 8% at quarter end compared to 0.96% for Q1 2025.

Jim: Classified loans as a percent of total loans were stable for the quarter decreasing to 166% at quarter end from 168% as of March 31.

Jim: Nonperforming loans increased moderately to 1.11% of total loans compared to 1.07% for the prior quarter, primarily driven by four relationships being placed on nonaccrual during the quarter, offset by the payoff in payments in two nonaccrual relationships. Net charge-offs for the quarter came in at $2.3 million, net of $1.4 million in recoveries, a reduction from the $2.7 million in net charge-offs reported for Q1. On an annualized basis, net charge-offs were 0.12% for the quarter and 0.13% annualized year-to-date. For the quarter, our allowance for credit losses increased $415,000 and ended the quarter at $92.4 million. On a percentage basis, our allowance increased from 1.28% to 1.29% net of mortgage warehouse.

Jim: Nonperforming loans increased moderately to 1.11% of total loans compared to 1.17% for the prior quarter, primarily driven by four relationships being placed on nonaccrual during the quarter offset by the payoff and payments into nonaccrual relationships.

Jim: Net charge offs for the quarter came in at $2 $3 million net of $1 $4 million in recoveries, a reduction from the $2 $7 million and net charge offs reported for Q1.

Jim: On an annualized basis net charge offs were one 2% for the quarter and 0.13% annualized year to date.

Jim: For the quarter, our allowance for credit losses increased $415000 and ended the quarter at $92 4 million.

Jim: On a percentage basis, our allowance increase from one point to 8% to $1 two 9% net of mortgage warehouse.

Jim: We continue to focus on the Moody's S2 scenario as the basis of our economic forecast within our CECL model. While we continue to make minor adjustments to the economic forecast portion of the reserve, we did not experience any significant changes in our CECL model since current economic headwinds are factored into this scenario.

Jim: We continue to focus on the Moody's <unk> scenario as the basis of our economic forecast within our seasonal model.

Jim: While we continue to make minor adjustments to the economic forecast portion of the reserve we did not experience any significant changes in our seasonal model since current economic headwinds are factored into this scenario.

Jim: Lastly, as the total 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 49% for ADC and 228% for CRE. We continue to be pleased with the performance of our portfolio and are well positioned to support our customers and provide strategic growth.

Jim: Lastly has the total 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 to total risk based capital of 49% for ADC and 228% for CRE.

Jim: We continue to be pleased with the performance of our portfolio and are well positioned to support our customers and provide strategic growth.

Wallace: I now turn it over to Wallace. Thanks, Jim, and good morning, everyone.

Wally: I'll now turn it over to Wally.

Wally: Thanks, Jim and good morning, everyone turning to the financial highlights in Q2, we reported diluted earnings per share of 47.

Wallace: Turning to the financial highlights, in Q2, we reported diluted earnings per share of 47 cents. As you can see on slide 25, the combined financial impact of notable items during the quarter equated to a net expense of $15.6 million, equivalent to 39 cents in EPS pressure. On the balance sheet side, loans increased 1.3% sequentially, but decreased 1.0% when excluding mortgage warehouse. Total deposits declined 2.6% during the quarter and excluding brokered declined 2.3%. While non-interest bearing deposits declined 2.5% sequentially, we note they remain stable at about 23% of total deposits and we continue to anticipate they will remain in the 22 to 23% range through 2025.

Wally: As you can see on slide 25, the combined financial impact of notable items during the quarter equated to a net expense of $15 $6 million.

Wally: Waveland to 39 cents and EPS pressure.

Wally: On the balance sheet side loans increased one 3% sequentially, but decreased 1.0% when excluding mortgage warehouse.

Wally: Deposits declined two 6% during the quarter and excluding brokered declined two 3%.

Wally: Noninterest bearing deposits declined two 5% sequentially. We note. They remained stable at about 23% of total deposits and we continue to anticipate they will remain in the 22% to 23% range through 2025.

Wallace: In looking at the decline in total deposits during the quarter, about 45% was driven by what we attribute to normal seasonality in our public funds customers. We also believe uncertainty in the current environment has led to some customers utilizing excess cash on hand to pay down outstanding loan balances, causing some pressure on both sides of the balance sheet.

Wally: And looking at the decline in total deposits during the quarter about 45% was driven by what we attribute to normal seasonality in our public funds customers.

Wally: We also believe uncertainty in the current environment has led to some customers utilizing excess cash on hand to pay down the outstanding loan balances, causing some pressure on both sides of the balance sheet.

Wallace: Given the loan and deposit declines on a year-to-date basis, we have reduced 2025 growth guidance to low single digits for both. Turning to the income statement, net interest margin expanded 17 basis points during the quarter to 3.61%. Included in margin this quarter was Argent's annual shareholder dividend, which was a four basis point benefit to NEM.

Wally: Given the loan and deposit declines on a year to date basis, we have reduced 2025 growth guidance to low single digits for both.

Wally: Turning to the income statement net interest margin expanded 17 basis points during the quarter to $3 six 1%.

Wally: Included in margin this quarter was argent annual shareholder dividend, which was a four basis point benefit to NIM.

Wallace: As Drake mentioned, we are very excited that we increased our ownership in Argent to 20% in July. As a result, moving forward with the equity method of accounting, we will no longer be recording this dividend through net interest income. Rather, we will be recording our portion of Argent ownership through our non-interest income line. 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 Q3-25, we increased our margin guidance by 20 basis points to 3.70% in Q4-25, and by 10 basis points to 3.55% for the full year, plus or minus 5 basis points.

Speaker Change: As Drake mentioned, we are very excited that we increased our ownership in origin to 20% in July.

Speaker Change: As a result, moving forward with the equity method of accounting.

Speaker Change: We will no longer be recording this dividends through net interest income.

Wally: Rather we will be recording our portion of origin ownership through our noninterest income line.

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 Q3 25, we increased our margin guidance by 20 basis points to 3.70% in <unk> 25, and by 10 basis points to 355% for the full year plus or minus five.

Wally: Five basis points our.

Wallace: Our modeling now considers 25 basis point Fed funds rate cuts in September and December.

Wally: Our modeling now considers 25 basis point fed funds rate cuts in September and December.

Wallace: Shifting to non-interest income, we've reported $1.4 million in Q1.

Wally: Shifting to noninterest income, we reported $1 $4 million in Q1, excluding.

Wallace: Excluding $14.6 million in net pressures from notable items in 2Q and $0.1 million in net benefits in Q1, non-interest income increased to $16 million from $15.5 million in Q1, due in large part to normal seasonality in our mortgage business and continued strength in our customer swap business, partially offset by a timing-related decline in fee income in our insurance business.

Wally: Excluding $14 $6 million and net pressures from notable items in <unk> and point $1 million in net benefits in Q1, noninterest income increased to $16 million from $15 $5 million in Q1 due in large part to normal seasonality in our mortgage business and continued strength in our customer swap business.

Wally: Partially offset by a timing related decline in fee income in our insurance business.

Wallace: Primarily as a result of triggering the equity method of accounting for our urgent ownership, we have increased our guidance, excluding notable items, to growth of low double digits for Q4-25 over Q4-24. Our non-interest expense decreased slightly to $62 million in 2Q from $62.1 million in 1Q. Excluding $1 million of notable items in Q2 and $2.1 million in Q1, non-interest expense increased slightly to $61.0 million from $60.0 million in Q1, slightly better than our expectation. In the back half of 25, we anticipate our expense run rate will be relatively flat compared to Q2, and we are maintaining our prior expense guide.

Wally: Primarily as a result of triggering the equity method of accounting for our origin ownership, we have increased our guidance. Excluding notable items to growth of low double digits for Q4 25 over Q4 'twenty four.

Wally: Our noninterest expense decreased slightly to $62 million in <unk> from $62 $1 million in <unk>.

Wally: Excluding $1 million of notable items in Q2, and $2 $1 million in Q1 noninterest expense increased slightly to 61.0 million from 60.0 a million in Q1 slightly better than our expectations.

Wally: In the back half of 'twenty five we anticipate our expense run rate will be relatively flat compared to Q2, and we are maintaining our prior expense guidance.

Wallace: Lastly, turning to capital, we note that Q2 tangible book value grew sequentially to $33.33, the 11th consecutive quarter of growth, and the TCE ratio ended the quarter at 10.9%, up from 10.6% in Q1. Consistent with prior commentary, we believe our capital levels provide us with flexibility to deploy capital opportunistically. And during the quarter, we repurchased 136,399 shares at an average price of $31.84.

Wally: Lastly, turning to capital we note that Q2 tangible book value grew sequentially to $33 33.

Wally: The 11th consecutive quarter of growth and the TCE ratio ended the quarter at 10, 9% up from 10, 6% in Q1.

Wally: Consistent with prior commentary, we believe our capital levels provide us with flexibility to deploy capital Opportunistically and during the quarter, we repurchased 136399 shares at an average price of $31 84.

Wallace: Yesterday, we announced the authorization of a new $50 million repurchase plan effective through July 2028. As shown on slide 24, all of our regulatory capital levels at both the bank and holding company levels remain above levels considered well capitalized. As such, we remain confident that we have continued capital flexibility to take advantage of any additional future capital deployment opportunities to drive value for our shareholders.

Wally: Yesterday, we announced the authorization of a new $50 million repurchase plan effective through July 2028.

Wally: As shown on slide 24, all of our regulatory capital levels at both the bank and holding company levels remain above levels considered well capitalized.

Wally: As such we remain confident that we have continued capital flexibility to take advantage of any additional future capital deployment opportunities to drive value for our shareholders.

Drake Mills: With that, I will now turn it back to Drake. Thanks, Wally. I'm very proud of the work our team is doing to optimize Origin.

Drake: With that I will now turn it back to Drake.

Drake: Thanks, Wally I'm very proud of the work our team is doing to optimize origin as we head into the back half of 2025, we are well positioned in the nations most dynamic market and I have full confidence that our employees will continue to deliver exceptional value to all our stakeholders. I believe there is tremendous opportunity ahead of us and I'm excited about our ability to capitalize on that opportunity.

Drake Mills: As we head into the back half of 2025, we are well positioned in the nation's most dynamic markets, and I have full confidence that our employees will continue to deliver exceptional value to all our stakeholders. I believe there is tremendous opportunity ahead of us, and I'm excited about our ability to capitalize on that opportunity.

Drake Mills: I want to thank you for your support, and we'll open it up for questions. Thank you, team.

I want to thank you for your support and we'll open it up for questions.

Drake: Thank you team.

Operator: 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 queue. Or, if you've joined via web, please press the raise hand icon on the right side of your Dear Roadshow screen. Again, that's star 1 on your telephone keypad or the raise hand icon on the right side of your Dear Roadshow screen.

Speaker Change: Ladies and gentlemen at this time, we will conduct a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to enter the queue or if you've joined via web. Please press the raise hand icon on the right side of your deal Roadshow screen again that star one on your telephone keypad or the race hand icon on the right side of your deal richest screen, we will pause.

Operator: We will pause here briefly to allow any questions to Our first question comes from Matt with Stevens. Matt, your line is open, you may proceed. Hey, good morning. Thanks for taking the question.

Speaker Change: Briefly to allow any questions to generate.

Speaker Change: Our first question comes from Matt with Stephens, Matt Your.

Speaker Change: Your line is open you May proceed.

Matt Stephens: Hey, good morning, Thanks for taking the question I'll start with the net interest margin.

Matt: I'll start with the net interest margin. And Wally, you mentioned you're expecting that margin to approach that 370 level by the fourth quarter, which obviously implies some good expansion from these levels. Can you just kind of walk us through the expectations for the third quarter and just trying to appreciate the ramp into the fourth quarter and what are some key items we should be thinking about that can get us to the 370 level from the 2Q levels? Thanks. Thanks, Matt.

Matt Stephens: And while you mentioned youre expecting that margin.

Matt Stephens: Approached at 370 level by the fourth quarter, which obviously implies some good expansion from these levels can you just kind of walk us through the expectations for the third quarter and just trying to appreciate the the ramp into the fourth quarter and what are some key items, we should be thinking about that can get us to the $3 70 level from the <unk> levels. Thanks.

Matt Stephens: Yeah.

Matt Stephens: Thanks, Matt.

Wallace: So I'll first will point out that the second quarter did have the benefit of our annual dividend from Argent, which was which was a four basis point benefit. Outside of that, we've had tailwinds all year from our loans repricing at spreads that are. relatively strong, but at, you know, Loan pricing overall that's significantly higher from loans that were booked, say, three, four years ago. That's a tailwind that we continue to expect moving forward, not just third quarter and fourth quarter, but through next year.

Matt Stephens: So I'll first will point out that the second quarter did have the benefit of.

Matt Stephens: Our annual dividend from origin, which was which was a four basis point benefit.

Matt Stephens: Outside of that we've had tailwind all year from our loans repricing at spreads that are.

Matt Stephens: Relatively strong but at.

Matt Stephens: Loan pricing overall, that's significantly higher from loans that were booked say three four years ago. That's a tailwind that we continue to expect moving forward not just third quarter and fourth quarter, but through next year.

Wallace: In our modeling, we put 2 Fed cuts in. We had a cut in June and September. Those moved to September and December in our modeling. The forward curve suggests there's another 2 cuts and it's close to 3 cuts through next year. We put those in our modeling, but the tailwind from the loan repricing and the securities repricing. Through next year would suggest that 1 will have benefits in the back half of this year and we think we can hold the line.

Matt Stephens: In our modeling we put two fed cuts and we had a cut in June and September. There's those moved to September into seven December in our modeling. The forward curve suggests there's another two cuts and it's close to three cuts it through next year.

Matt Stephens: We put those in our modeling, but the tailwind from the loan repricing in the securities repricing through next year would suggest that one will have benefits in the back half of this year and we think we can hold the line through next year with those cuts.

Wallace: Through next year with those cuts, it's probably probably worth acknowledging that there are some. Pricing pressures in the market from competition on spreads. So, if we, if we see loan growth accelerating, you could see. margin coming in kind of towards the lower end of that guidance range that we put in the deck. But if not, then we could come in towards the higher end.

Matt Stephens: It's probably probably worth acknowledging that there are some.

Matt Stephens: Pricing pressures in the market from competition on spreads so if we.

Matt Stephens: If we see loan growth accelerating he could see.

Matt Stephens: Margin coming in kind of towards the lower end of that guidance range that we put in the deck.

Matt Stephens: But but if not then we could come in towards the higher end I think that's the way I would steer you as you think about your modeling.

Matt: I think that's the way I would steer you as you think about your model. Okay, thanks for the color, Wally.

Speaker Change: Okay. Thanks for the color Wally.

Lance: And then just as a follow-up, I guess, kind of switching gears, I want to ask more about the loan growth. And Lance mentioned the paydowns in the final weeks of the quarter from some customers, just lower utilization. Any more details behind that as you talk with the customers as far as kind of why they decided to do that now? And then longer term, you've talked about getting back to a high single-digit growth level or even low double-digit at some point.

Speaker Change: And then just as a follow up I guess kind of switching gears I want to ask more about the loan growth.

Speaker Change: And Lance mentioned that pay downs in the final weeks of the other quarter from some customers just lower utilization.

Speaker Change: Any more details behind that as you talk with the customers as far as kind of why they decided to go.

Speaker Change: To do that now and then longer term you've talked about getting back to a high single digit growth level or even low double digit at some point just talk more about the longer term investments you've made.

Lance: Just talk more about the longer-term investments you've made and when do you expect a more normalized, kind of typical origin level of loan growth to start kicking in? Thanks. Yeah, hey, thanks. Good morning. Appreciate the question very much. Yeah, so. very optimistic on our ability to continue to drive loan growth. You are correct in that what our presidents and our banking teams have kind of been dealing with is, you know, just a little unsurity around what tariffs we're going to do on large commercial projects. I think we had a lot of clients that expected rates to be decreased by now, which has put some projects on hold.

Speaker Change: And when when do you expect a more normalized kind of typical origin level of loan growth to start kicking in.

Speaker Change: Yeah.

Speaker Change: Yeah, Hi, Thanks. Good morning appreciate the question very much yes. So.

Speaker Change: Ari optimistic on our ability to continue to drive loan growth you are correct.

Speaker Change: And that what our presidents and our banking teams have kind of in dealing with us.

Speaker Change: Just a little unsurety around what tariffs, we're going to do on large commercial projects I think we had a lot of clients that expected rates to be decreased by now which has put some projects on hold.

Lance: We actually saw an interesting dynamic, you know, this quarter, but a little bit in the first quarter, too, of some customers that had really large deposit balances make the decision to reduce that cash and pay for projects versus using debt, and it was stuff that we had in the pipelines. some headwinds that we faced in that regard. You know, that being said, as I kind of study and look at production, our original we've had nice growth in our origination volume. and that has really kind of led to really nice growth in loan and swap fee revenue, nice lifts on the C&I side specifically as our focus has really been around C&I.

Speaker Change: We actually saw an interesting dynamic.

Speaker Change: This quarter, but a little bit in the first quarter two of.

Speaker Change: Some customers that had really large deposit balances make the decision to reduce that cash and paper projects versus using debt and it was stuff that we had in the pipeline and so that's.

Speaker Change: Some headwinds that we faced in that regard.

Speaker Change: That being said if <unk>.

Speaker Change: I kind of study and look at production or our original we've had nice growth in our origination volumes.

Speaker Change: And that is really kind of led to a really nice growth in.

Speaker Change: Loan and swap fee revenue nice lifts on the CNI side, specifically as our focus has really been around C&I.

Lance: owner-occupied real estate. And so we've had sort of the best quarter we've had in treasury management revenue, swap revenue, and so I'm very bullish on how that continues to grow. As I think about the second half of this year, I'm still a little bit muted from the size of projects. We're probably thinking... You know, mid-single digit annualized, I think 2 to 2.5% probably growth from the markets on commercial growth in the back half of this year. And then, you know, I would conservatively kind of think through mid to high single digits for 2026. Now, that being said, as I think about what's going on in the industry from a consolidation perspective, I mean, that creates tremendous opportunity for us.

Speaker Change: Owner occupied real estate and so we've had the best quarter. We've had in Treasury management revenue swap revenue and so I'm very bullish on how that continues to grow.

Speaker Change: As I think about the second half of this year.

Speaker Change: I mean, it's still a little bit muted from the size of projects.

Speaker Change: We're probably thinking.

Speaker Change: So mid single digit annualized I think two to two 5% probably growth from the markets on commercial growth in the back half of this year.

Speaker Change: And then you know I would start with the kind of thing through mid to high single digits for 2026.

Speaker Change: Now that being said as I think about what's going on in the industry from a consolidation perspective, I mean that creates tremendous opportunity for us I mean, you know our our history and our story if we've done anything well over the years it is to build a culture.

Lance: I mean, you know, our history and our story, if we've done anything well over the years, it is to build a culture that is attractive to dynamic bankers and banking And as we are already seeing acquisition consolidation, you know, in Texas and North Louisiana and Mississippi. I think that creates tremendous opportunity for Origin in the way that we like to do it. We want to be a lift-out strategy organization, and I think that falls right into our benefit. I think that's going to continue to drive real opportunity.

Speaker Change: That is attractive to dynamic bankers and banking teams and as we are already seeing act.

Speaker Change: Acquisition consolidation in Texas, and North, Louisiana and Mississippi.

Speaker Change:

Speaker Change: I think that creates tremendous opportunity for origin.

Speaker Change: In the way that we like to do it I mean, we want to be a lift out strategy organization and I think that falls right into our benefit so.

Speaker Change: I think that's going to <unk>.

Speaker Change: Continue to drive ROE opportunity, you know all that being said.

Lance: All that being said... We are singularly focused on our ROA run rate, and so pricing discipline is critical, the use of our pricing models. Wally and his team have done an amazing job of bringing us access to information that we have not had before. And so, you know, it is not going to be growth for growth's sake for us. This is really going to be around the right kind of growth, the right kind of industries, the right kind of credit profile, the right kind of pricing discipline around relationships. And I feel very confident we can do both.

Speaker Change: We are singularly focused on our ROE a run rate and so pricing discipline is critical use of our pricing models, while he and his team have done an amazing job of bringing us access to information that we've not had before so.

Speaker Change: It is not going to be growth for growth's sake for us. This is really going to be around the right kind of growth or I kind of industries. The right kind of credit profile, the right kind of pricing discipline around relationships and I feel very confident we can do both.

Drake Mills: Hey, Matt, this is Drake. I want to add to that an example of some, I guess, growth headwinds and alongside is utilization rates went from 53% to 50%. And that was based on cash utilization our clients, you know, utilized during that, which represented about $83 million in reduction in line utilization. So, again, glad that our clients have strength in our.

Matt Stephens: Matt This is dry it I want to add to that.

Matt Stephens: As ample of some I guess growth headwinds in alone side as utilization rates.

Matt Stephens: It went from 53% to 50 and that was based on cash utilization our clients.

Matt Stephens: No utilized their neck, which represented about $83 million in reduction in line utilization. So again glad that our clients are have strengthened or.

Matt: taking those opportunities, it also hits us on the deposit side. All are back in the queue, but I appreciate the update and congrats on the results.

Matt Stephens: Taking those opportunities it also hits us on the deposit side.

Matt Stephens: Okay.

Speaker Change: Oh are back in the queue, but I appreciate the update and congrats on the results.

Matt Stephens: Yeah.

Matt Stephens: Yeah.

Michael: Our next question comes from Michael with Raymond James. Michael, your line is open, you may proceed. Hey, good morning, guys. Thanks for taking my questions. Maybe I'll just start, easy one, just on the buyback. Looks like you guys bought back a little bit of stock. Looks like it was below tangible book, new $50 million program. You guys are now over tangible book, hopefully moving higher. But wanted to gauge the appetite here and just circle up capital. And maybe if I can doesn't seem like that's near term priority for you guys. But as the landscape plays out, I assume you're still talking to you have conversations.

Michael: Our next question comes from Michael with Raymond James Michael Your line is open you May proceed.

Michael: Hey, good morning, guys. Thanks for taking my questions.

Michael: Maybe I'll just start a easy one just on the on the buyback it looks like you guys bought back a little bit of stock. It looks like it was below tangible book New $50 million program. You guys are now over tangible book.

Michael: Hopefully moving higher.

Michael: But wanted to kind of gauge the appetite here.

Michael: And just kind of circle up capital and maybe if I can dovetail that with just because we have seen some M&A doesn't seem like that's near term priority for you guys, but as the landscape plays out.

Michael: You are still talking to have conversations with banks.

Michael: Thanks.

Drake Mills: What would be kind of your intermediate to longer term appetite for M&A? Thanks. And let me address the first part of your question. From the standpoint of capital utilization, we feel pretty comfortable that we have an opportunity to redeem $75 million, yeah, $75 million. sub-debt in the fourth quarter that is beneficial to our process of optimized origin. So we feel very comfortable, and that puts us basically through last year and this year redeeming $145 million out of cash. So an awesome opportunity for us to reduce leverage and take care of some of the opportunities we have for cash.

Michael: What would be kind of your intermediate to longer term appetite for M&A. Thanks.

Michael: Yeah, Let me address the first part of your question.

Michael: From the standpoint of capital utilization, we feel.

Michael: Comfortable that we have an opportunity to redeem $75 million $75 million of sub debt in the fourth quarter that has a beneficial to our process of optimize origin. So we feel very comfortable and that puts us basically through last year and this year redeeming 145.

Michael: 5 million out of cash so.

Michael: Awesome opportunity for us to reduce leverage and take care of our summer.

Michael: Some of the opportunities we have for cash so capital utilization I feel very good about that will put us still very good capital.

Drake Mills: So capital utilization I feel very good about. That will put us still very good capital. levels.

Drake Mills: As far as M&A, we love M&A. We were laughing about it. When M&A is in our backyard, we seem to really flourish through our lift-out strategies. We have conversations moving on. We love to grow this institution through lift-out, but not to say that we are not going to turn our back on opportunities. They just have to be quality deposit opportunities or core deposit opportunities for us, but we continue to have those conversations. Helpful, Drake.

Michael: Levels and as.

Michael: As far as M&A, we love M&A, we were laughing about it when the M&A is in our backyard, we seem to really flourish.

Michael: Lou I lift out strategies, and we have conversations moving on and we just we love to grow this institution through lift out but not to say that we are not going to turn it back on opportunities.

Michael: It has to be quality deposit opportunities or core deposit opportunities for us, but we will have we continue to have those conversations.

Greg: That's helpful. Greg.

Michael: And then maybe just given the reduction in growth expectations, it does look like you are going to be able to stay under $10 billion in assets.

Greg: And then maybe just just given the reduction in growth.

Speaker Change: Expectations. It does look like you are.

Speaker Change: To be able to stay under under $10 billion in assets is that kind of the plan and then can you just remind us on.

Michael: Is that kind of the plan? And then can you just remind us on, maybe the thresholds could be moved. There's been some talk around the $10 billion and what that could mean. It doesn't seem like Durbin would go away, though. So just any sort of considerations, we should think about $10 billion by the end of the year. And then when you do cross it, I think you have all the expenses kind of in place and the run rate, but just anything we should be thinking about related to crossing.

Speaker Change: Maybe the thresholds could be moved there has been some talk around the 10 billion and what that could mean it doesn't seem like Durbin would go away, though so just any sort of considerations. We should we should think about.

Speaker Change: 10 billion by the end of the year and then when you do cross it.

Speaker Change: You have all the expenses kind of in place and the run rate, but just anything we should be thinking about related to crossing.

Drake Mills: Thanks. Well, I can't sit here and say that I'm tickled that we're going to stay under 10B because it's at the expense of what we thought would be stronger growth this year. I am very pleased with everyone that we're so focused on ROA growth that I think we're making the right decisions, but allows us to push off Durbin, which is about $6 million for us another year. But right now, the model shows that we'll be right at $10 billion at the year end with expected growth, so we'll stay under that this year and start to move forward.

Speaker Change: Well I I can't sit here and say that I'm tickled that we're going to stay under 10 billion because it's at the expense of what we thought would be stronger growth this year.

Speaker Change: I am very pleased with with everyone that we have we're so focused on ROA growth.

Speaker Change: We're making the right decisions but.

Speaker Change: Laos us to push off a durbin, which is about $6 million for us another year, but right now the model shows it will be right at that $10 billion at year end with with expected growth. So we'll we'll stay under that this year.

Speaker Change: Start to move forward, but.

Drake Mills: Again, we're not holding our teams back or we're not doing things to it. focused on any type of loss of opportunity through trying to stay under.

Speaker Change: Again, we're we're not holding our teams back or we're not doing things too.

Speaker Change: Focus on.

Speaker Change: Any type of loss of opportunity through trying to stay under 10 B at this point.

Speaker Change: Yeah.

Michael: All right, thanks for taking my questions. I'll step back.

Speaker Change: Alright, Thanks for taking my questions I'll step back.

Speaker Change: Thank you again Michael.

Woody: Our next question comes from Woody with KBW. Woody, your line is open, you may... Hey, good morning, guys.

Speaker Change: Our next question comes from Woody with BW.

Speaker Change: Your line is open you May proceed.

Speaker Change: Hey, good morning, guys.

Woody: wanted to wanted to follow up on capital utilization and in touch on the securities restructure we saw in the quarter. Just wanted to get your thoughts on sort of Why this quarter to execute on the restructure? Is it a reflection of loan growth pulling back? And then how do you evaluate future restructures from here?

Speaker Change: Wanted to wanted to follow up on capital utilization.

Speaker Change: And.

Speaker Change: <unk> touch on the securities restructure we saw in the quarter.

Speaker Change: Just wanted to get your thoughts on sort of.

Speaker Change: Why this quarter to execute on the restructure is that a reflection of wound growth pulling back and then how do you evaluate your restructures from here.

Woody: Hey, Woody. We actually had this restructure trade teed up. in the first quarter. We liked the payback math on it. We felt like we had the capital levels to absorb the impact on the regulatory capital levels. Obviously, it's already carried in the tangible capital levels. We backed off of the trade when the markets got extremely volatile around the tariff announcements. We saw an opportunity early in the second quarter to take advantage of some spread changes where we'd executed a small portion of the trade. And then we saw volatility improve significantly as the quarter played on.

Woody: Hey, Woody.

Woody: We actually had this restructure trey.

Woody: Trade teed up.

Woody: And the first quarter.

Woody: We like we like the payback math on it.

Woody: We felt like we had the capital levels.

Woody: <unk> levels to absorb the impact on our regulatory capital levels. Obviously, it's already carry carried in the tangible capital levels. We we backed off of the trade when the markets got extremely volatile around the tariff announcements.

Woody: We saw an opportunity early in the second quarter to take advantage of some spread changes, where we executed a small portion of the trade and then we saw volatility improve significantly as the quarter played on so we decided to go ahead and bring that trade back to the table. This is Juan.

Woody: So, we decided to go ahead and bring that trade back to the table. This is one that we'd been the payback math, as you can see, is a little bit higher than it was in the one that we executed towards the end of last year. As far as large loss trades go, this is it. We don't see any other opportunity in our portfolio. That said, we monitor markets on a daily basis. And if there's any spread opportunities that create opportunity for us to, on the margin, make decisions that improve the risk profile or improve the earnings profile of the portfolio, then we will discuss and make a decision on whether or not to execute those.

Woody: We'd been considering as part of optimize origin.

Woody: Since the end of last year.

Woody: The payback math as you can see is a little bit higher than it was in the one that we executed towards the end of last year.

Woody: As far as large loss trades go. This is this is that we don't see any other opportunity in our portfolio.

Woody: That said, we monitor markets on a daily basis, and if there's any spread.

Woody: Opportunities that could create opportunity for us to on the margin make decisions that improve the risk profile or improve the <unk>.

Woody: Earnings profile of the portfolio. Then then we will discuss in.

Woody: Make a decision on whether or not to execute those but I think that we're not looking at any large scale trades from here.

Woody: But I think that we're not looking at any large-scale trades from here. Got it.

Woody: Got it that's helpful.

Lance: Maybe, and then maybe shifting over to Origin. I mean, seeing the announcement was, was great to see. Is there an opportunity going forward to increase ownership, which would, which would boost board fee income? Or are you pretty content with the current level of ownership?

Woody: Maybe and then maybe shifting over to RJ and I mean that announcement was with great to see is there an opportunity going forward.

Woody: The increased ownership, which would which would boost board fee income or are you pretty content with the current level of ownership.

Lance: Hey, Woody, this is Lance. Good morning. Now, I think you're going to see us stay consistent in that 20 to 25% ownership level. You never know what happens in the future, but that's our and Origin's strategic plan for the moment. Got it.

Lance: Yeah, Hey, this is lance good morning.

Speaker Change: Thank you are going to see us stay consistent.

Speaker Change: At $20 to 25% ownership level in.

Speaker Change: You never know what happens in the future, but that's our that's our and origin strategic plan for the moment.

Speaker Change: Got it and then maybe just last for me you called out some.

Lance: And then maybe just last for me, you called out some, you're continuing to re-underwrite expenses. Just wanted some high-level thoughts on sort of how that process is going and sort of timing of the additional expense opportunities. Yeah, I think through Optimize Origin, we're looking at as much revenue enhancement as we are, you know, expense cuts.

Speaker Change: You're continuing to re underwrite expenses.

Speaker Change: Just wanted some high level thoughts on sort of how that process is going and sort of timing of the additional expense opportunities.

Speaker Change: Yes, I thought things through optimize origin, we're looking at as much revenue enhancement as we are.

Speaker Change: Expense cuts we.

Lance: We've communicated openly that we are working with a third party benchmarking firm to look at reorganization of the company. We think there are some opportunities for us to consolidate some market expenses, you know, to be able to reduce or be a little bit more efficient. But the projects are really around revenue enhancement, you know, data models to better utilize data, to make better decisions, and to also allow our relationship managers to be more responsive and really focus on ROEs through relationships more than anything else. Process improvement is going to be, I think, one of the areas that we could potentially see some reduced expenses.

Speaker Change: We've communicated openly that.

Speaker Change: We are working with a third party benchmarking firm to look at reorganization of the company. We think there are some opportunities for us to consol.

Speaker Change: Consolidate some market expenses.

Speaker Change: To be able to reduce or be a little bit more efficient, but the projects are really around revenue enhancement.

Speaker Change: No data models to better utilize data to make better decisions and to also allow our relationship managers to be more responsive and really focus on ROE through relationships more than anything else process improvement is going to be I think one of the areas that we.

Speaker Change: We could potentially see some reduced expenses, we still are using robotics to manage our manual processes reduce manual processes, which we see creating efficiency.

Lance: We still are using robotics to manage our manual processes and reduce manual processes, which we see create inefficiency. You know, AI is certainly part of going beyond robotics and increasing technology that allows us to make better decisions through data. But, you know, ultimately, growth through enhancing banker capacity is where I think the ultimate drive for us. In other words, we think we can. The percentage of time in front of our clients can be significantly enhanced and grown through these processes we're going through, so it's going to be a combination of revenue enhancement, expense management, and growth and revenue streams that you'll see in the next coming months, but Optimize Origin is on its way.

Speaker Change: Certainly.

Speaker Change: Part of going beyond robotics, and an increase in technology that allows us to make better decisions through data but.

Speaker Change: Ultimately grow through enhancing banker capacity is where I think.

Speaker Change: The ultimate driver for us in other words, we think we can.

Speaker Change: The percentage of time in front of our clients can be significantly enhanced and grown through these processes rolling through so it's going to be a combination of revenue enhancement and expense management and growth in revenue streams that you will see in the next coming months, but optimize our origin is one its way we've had some excellent.

Lance: We've had some excellent progress. I feel very comfortable that you'll see some additional progress as we go through the quarter.

Speaker Change: Progress feel very comfortable.

Speaker Change: Comfortable that Youll see some additional progress as we go through the quarters.

Woody: Optimize Origin It's great to be here. But I'll just add, Woody, that in this in the script, you might have heard the comment I made that our expectation for expenses in the back half of the year are flat, flat run rate from the second quarter after notable items. So, I wouldn't I wouldn't expect to see declines in expenses. Got it. All right. That's helpful. Thanks for taking my question. Thank you again, Woody.

Speaker Change: Okay, Great Alright.

Speaker Change: But I would just add what is that in this in the script.

Speaker Change: Script, you might've heard the comment I made that our expectation for expenses in the back half of the year are flat flat run rate from the second quarter. After notable items. So I wouldn't I wouldn't expect to see declines in expenses.

Speaker Change: Got it alright, that's helpful. Thanks for taking my question.

Speaker Change: Thank you again Woody.

Manuel: Our next question comes from Manuel with D.A. Davidson.

Speaker Change: Our next question comes from Manuel with D. A Davidson.

Manuel: Manuel, your line is open, you may proceed. Hey, I just have two It's hard to kind of learn a lot more about Origin. Can you talk a little bit about your expectations on growth there? And potentially, would there be a write-up? I just haven't heard if that could be something that happens in the third quarter.

Speaker Change: Your line is open you May proceed.

Manuel: Hey, I just had two.

Manuel: It's hard to kind of learn a lot more about origin.

Manuel: Can you talk a little bit about what you.

Manuel: Your expectations on growth, there and potentially would there be a write up.

Manuel: Haven't heard it.

Manuel: If that could be something that happens in the third quarter.

Manuel: Yeah.

Lance: So yeah, hey, this is Lance. Thanks for the question. Wally and I, then obviously Drake's very intimate with understanding their relationship. I mean, it's a little bit sensitive for us that as a, you know, private company that we are an investor in, we don't own or control Argent. So, you know, sharing their information, you know, other than sort of high level probably not something that we're completely at our liberty to do, although we have a great working relationship with management. There was recently some public information out around their acquisition of Huntington's corporate trust business. where they were projecting to be about $175 billion in assets under administration.

Lance: Yeah, Hey, this is lance thanks for the question.

Speaker Change: While eni that obviously drags very intimate with the understanding that relationship I mean, it's a little bit sensitive for us that as a private company that we are an investor and we don't own or control origin. So.

Lance: Sharing their information you know other than sort of high level.

Lance: It's not something that were completely at our liberty to do although we have a great working relationship with management.

Lance: There was recently some public information out around.

Lance: Their acquisition of Huntington's corporate Trust business, where.

Lance: They were projecting to be about 175 billion and assets under administration.

Lance: Wally works closely with their CFO, which is sort of where they were able to kind of get to the pro forma $6 million flowing into our income statement in 2026. And so we'll, over the years, kind of work with them to kind of give you the meaningful information that you need, and we'll commit to that. Potential for a write-up. Yeah. So, in the third quarter financials, due to the transactions that occurred that we were a part of, we weren't the only transaction, the valuation that those transactions occurred in will result in a write-up of the final, if you will, carrying value of our investment in Origin.

Lance: While he works closely with their CFO, which is sort of where they were able to kind of get to the.

Lance: Pro forma $6 million.

Lance: Flowing into our income statement in 2026 and so.

Lance: Well, well well over the years kind of work with them to kind of give you the meaningful information that you need and we'll commit to that.

Lance: Okay.

Lance: Potential for a write up.

Lance: Yeah.

Lance: So sandy in the third quarter financials due to the the.

Lance: The transactions that occurred that we were a part of it we didn't we weren't the only transaction the valuation that those transactions occurred and will result in a write up of the final if you will carrying value off.

Lance: Of our investment and argue that right up <unk> to about $7 million moving forward.

Lance: That write-up equates to about $7 million. Moving forward, with the equity method accounting, the write-up of the investment will occur through the income statement, and that's the $6 million annualized benefit kind of starting in 2026. We still have some accounting work to do.

Lance: With the equity method of accounting the the write up of the investment will occur through the income statement and that's the 6 million dollar annualized benefit kind of starting in 2026, we still have some accounting work to do where we got to do a final valuation to help us understand the impact of customer intangibles to us.

Lance: We've got to do a final valuation to help us understand the impact of customer intangibles to us and the acquisition that Lance mentioned has to close before we get kind of final expectations on how that will impact earnings. So, yes, there will be a write-up in the third quarter, plus we expect to accrue for earnings, and then any further changes in the valuation will occur through the income statement, not through write-ups or write-downs.

Lance: And.

Lance: The acquisition that.

Speaker Change: Lance mentioned has to close before we get kind of final expectations on how that will impact earnings.

Speaker Change: So yes, there will be a write up in the third quarter, plus we will we expect to accrue for earnings and then any further changes.

Speaker Change: Changes in the valuation will occur through the income statement not through write ups or write downs.

Manuel: I appreciate any of these preliminary comments. I totally understand there's a lot of moving parts here.

Speaker Change: I appreciate any of these preliminary.

Speaker Change: Comments I totally understand.

Speaker Change: There's a lot of moving parts here.

Lance: Separately, can I have a little bit of a regional update? I'm just always intrigued by the southeast region with the Alabama and Florida business. How is that ramping? But just any kind of regional update would be fantastic.

Speaker Change: Separately.

Speaker Change: CAC, a little bit of a regional update I'm, just always intrigued by the southeast region with the Alabama, Florida business, how is that ramping.

Speaker Change: But just any kind of regional update would be fantastic.

Lance: Yeah, this is Lance again. Really, really pleased. Nate and Robin and Steve and the whole team that we have down in the southeast. We're seeing nice progress on that. Kind of like we've seen in a little bit of the markets, a little bit of delay and sort of pipelines getting executed because of some of the tariff concerns, but the pipelines remain strong. We continue to be incredibly bullish in Texas, obviously, and how that economy is working. We have dynamic teams. Again, it's a little muted because of the lack of growth, but you look at where the production is coming from.

Lance: Yeah. This is lance again really really pleased with that.

Speaker Change: Robin and Steve and the whole team that we have down in the southeast we're seeing nice progress on that kept kind of like we've seen a little bit of the market's a little bit of delay and sort of pipelines getting executed because of some of the tariff concerns.

Lance: But the pipelines remained strong.

Lance: We continue to be incredibly bullish and Texas, obviously and how that economy is working and what we have dynamic teams.

Lance: Again as I as I look at you know, it's a little muted because of sort of the lack of growth, but you look at where the production is coming from and we're continuing to see nice C&I production and in Houston, specifically, but also in North Texas, Louisiana.

Lance: We're continuing to see nice C&I production in Houston specifically, but also in North Texas. Louisiana and Mississippi are actually ahead of budget this year. We've actually had about 8% growth in Louisiana and about 5% growth in Mississippi, which were greater than we had anticipated. We get some understanding of what the tariffs are going to be. We get some normal levels of utilization on our lines. I think it creates tremendous opportunities. I appreciate that commentary.

Lance: Louisiana and Mississippi are actually ahead of budget. This year, we've actually had about 8% growth in Louisiana and about 5% growth in Mississippi, which were greater than we had anticipated so.

Lance: You know, we get some understanding kind of what the tariffs are going to be we get some normal normal levels of utilization on our lines. So I think it creates tremendous opportunity.

Lance: I appreciate that commentary thank you.

Manuel: Thank you.

Operator: Thank you again, Manuel. Ladies and gentlemen, as a reminder, if you'd like to ask a question, press star 1 on your telephone keypad to enter the queue, or if you've joined via web, the raise hand icon on the right side of your dear Rocha's There are currently no further questions.

Lance: Thank you again mid well.

Lance: Ladies and gentlemen, as a reminder, if you'd like to ask a question press star one on your telephone keypad to enter the queue or you joined via web the retained icon on the right side, if you do richest screen.

Speaker Change: Here's there are currently no further questions tend to get back to Drake mills for any final remarks.

Drake Mills: Handing it back to Drake Mills for any final remarks. I want to thank everyone for being on the call. At this point, I am extremely pleased with our progress the teams have made in optimizing Origin. We are extremely focused on profitable growth, which I think is underlying to the change in culture. Utilization of technology to minimize expense growth has been... leader in the process of optimized origin, expanding current relationships for better customer ROEs, continue to leverage our rural deposit base to lower our funding costs, and a strong focus on strengthening credit culture through client selection has been the early wins this year as we continue to go through the second half.

Speaker Change: Thank you everyone for being on the call at this point I am.

Speaker Change: I am extremely pleased with our progress the teams have made in optimizing the origin. We are extremely focused on profitable growth, which I think is underlying to the changing culture utilization of technology to minimize expense growth has been.

Speaker Change: Later in the process of optimize origin, expanding current relationships with for better customer Roe's.

Speaker Change: To leverage our rule deposit base to lower our funding costs and a strong focus on strengthening credit culture through client selection has been the early wins. This year as we continue to go through the second half. So our future is bright very excited about where we are and I'm pretty confident that we're going to be successful I appreciate each one of your.

Drake Mills: So our future is bright, very excited about where we are, and I'm pretty confident that we're going to be successful.

Speaker Change: Port.

Drake Mills: I we're available for questions if anybody needs to have a conversation with us. So again, thank you for your time. Thank you for your service.

Speaker Change: Time on this call and we're available for questions if anybody needs to have a conversation with it. So again. Thank you for your time. Thank you for your support.

Operator: Ladies and gentlemen, this concludes today's Evercall. Thank you and have a great day.

Speaker Change: Ladies and gentlemen, this concludes today's evercore. Thank you and have a great day.

Speaker Change: Yeah.

Operator: The host has ended this call. Goodbye.

Speaker Change: The host has ended this call goodbye.