Origin Bancorp’s third quarter performance was marked by strong top-line growth, but the market response was negative as investors focused on a significant credit event. Management identified the $28.4 million charge-off related to alleged fraud at long-time borrower Tricolor as the primary factor impacting results, with CEO Drake Mills describing the event as “extremely conservative” and emphasizing the company’s commitment to aggressive recovery efforts. Excluding the charge, management highlighted momentum from the Optimize Origin initiative, including rising loan originations and growth in noninterest-bearing deposits, but acknowledged that the Tricolor loss weighed heavily on the quarter’s perception.

Is now the time to buy OBK? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Origin Bancorp’s Q3 Earnings Call

• Matt Olney (Stephens) asked about exposure to nonbank financial institutions and subprime lending. Chief Risk Officer Jim Crotwell detailed exposures, emphasizing that subprime auto loans are minimal and performing, and that the broader NBFI portfolio is stable with no delinquencies.
• Matt Olney (Stephens) probed the likelihood and timing of insurance recoveries from the Tricolor loss. CEO Drake Mills said recovery efforts are ongoing but timing and amounts remain uncertain, which drove the decision for a full charge-off this quarter.
• Matt Olney (Stephens) questioned the persistent reduction in loan growth guidance throughout the year. President Lance Hall attributed slower reported growth to unusually high paydowns, not weak originations, and expressed optimism for a rebound as pressures subside.
• Wood Lay (KBW) inquired about the impact of enhanced risk controls on future expenses. Mills said new internal teams and process improvements should not significantly raise costs, as the enhancements leverage existing resources.
• Unknown Analyst (Raymond James) asked whether the Optimize Origin initiative’s heavy lifting was ending and if the focus would now shift to balance sheet growth. Hall replied that Optimize remains an ongoing strategic process, with continued improvement projects planned for the coming year.

Catalysts in Upcoming Quarters

Looking ahead, our team will monitor (1) the pace of loan growth and whether new business in Texas and Southeast markets offsets paydown headwinds, (2) the effectiveness of enhanced credit controls in limiting future loss events, and (3) sustained momentum in noninterest-bearing deposit growth. We’ll also watch for execution on the Optimize Origin initiative and the ability to capitalize on competitor disruption.

Origin Bancorp currently trades at $34.80, up from $34.35 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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