Origin Bancorp Stock

Ladies and gentlemen, good morning, and welcome to the Origin Bancorp, Inc. Second Quarter Earnings Conference Call. My name is Tom, and I'll be your Evercall coordinator.

[Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference call over to Chris Reigelman, Director of Investor Relations. Please go ahead.

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 the slide presentation we will refer to during today's 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 ir.origin.bank. Please also note that our safe harbor statements are available on Page 7 of our earnings release filed with the SEC yesterday. All comments made during today's call are subject to our safe harbor statements in our slide presentation and earnings release.

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 Brolly; and our Chief Credit and Banking Officer, Preston Moore. After the presentation, we'll be happy to address any questions you may have. Drake, the call is yours.

Thanks, Chris, and thanks for being with us this morning. This quarter marks another important step in the work we started about 18 months ago with Optimize Origin. We have remained disciplined in executing a strategy centered on delivering elite financial performance while strengthening the culture that has always differentiated Origin. Today, we are seeing the benefits of that work across our company. We reported strong net income, ROA and ROE results in the second quarter. We achieved these results while maintaining disciplined growth, strong credit performance and continued investment in our people and our franchise. We believe the best long-term results come from balancing strong profitability with disciplined execution.

What encourages me most is the consistency of our performance. Optimize Origin has become the way we operate. It influences how we allocate capital, how we invest in technology, how we recruit talent and how we serve clients and ultimately how we create value for our shareholders. The opportunities we discussed over the last several quarters continues to grow. The disruption we're seeing across our markets continues to create opportunities. Talented bankers and quality clients are looking for stability, a strong culture and a long-term partner.

Our teams continue to capitalize on this disruption. We are well positioned to grow relationships without compromising credit standards and client selection process that have helped define Origin's success. As we move through the remainder of 2026, our objectives remain clear. We will continue to execute on Optimize Origin, invest strategically across our footprint, attract exceptional talent and appropriately deploy excess capital. These priorities position us well to achieve our near-term financial targets while continuing our pursuit of becoming a top quartile performer.

Now I'll turn it over to Lance and team.

Thanks, Drake, and good morning. Over the past 18 months, Optimize Origin has transformed the way we operate. We are becoming a more disciplined, more intelligent and more scalable organization. Optimize represents the intersection of focused execution, strategic investment and the ability to capitalize on market disruption that positions Origin for long-term value creation. The results we report in this quarter highlight the generational market disruption opportunity in our footprint on both the banker and client acquisition fronts. Since April 1, we added 12 experienced bankers as part of our targeted and disciplined lift-out strategy. That follows the 15 bankers we added during the first quarter.

In the second quarter, we expanded into Birmingham, Alabama with a well-known team of local experienced bankers. We also added production talent in North Texas, Houston, East Texas and Mississippi. These additions reinforce our belief that Origin is increasingly becoming an institution of choice for talented bankers and quality clients who believe that trust is earned, not acquired. Great Bankers attract great clients, and we're seeing that play out across our markets. I'm equally encouraged by the balance and discipline of our growth.

Year-to-date, C&I and owner-occupied commercial real estate grew $196 million, other commercial real estate categories grew $167 million, and mortgage warehouse grew $61 million. This healthy growth is based on full relationships with disciplined pricing and attractive long-term results. Our strategic investments in growth markets continue to validate our vision. Through the first half of the year, our Texas and Southeast markets generated $323 million of loan growth including roughly $250 million from Texas alone on approximately $860 million of new loan production. The market disruption opportunity is real. We are taking advantage of this opportunity during this period with new bankers, new clients, new production and strong pipelines across the company.

Our objective clearly is not just to grow asset size. Through data and models, our focus is on relationship profitability, pricing, core deposit generation and long-term returns. That discipline on both the asset and funding side of the balance sheet is becoming an important differentiator for Origin. On the deposit side, I'm very encouraged how we're executing. Noninterest-bearing deposits increased nearly $200 million during the quarter and are now 26% of total deposits. That is a meaningful outcome, but more importantly, it's evidence that our bankers are winning primary banking relationships. This is supported as I look more deeply into our deposit account opening data.

Account openings accelerated meaningfully during the first half of the year, up more than 36% year-over-year. The pace continued to build throughout the second quarter. June was a historically strong month for deposit account openings with new account openings up 82% year-over-year. To me, this growth is one of the clearest indicators that our relationship strategy is gaining traction. Deposit account growth is not just a funding metric, it's a client acquisition metric. It tells us that the businesses and families across our markets are choosing Origin as their primary banking partner. While we continue investing in talented bankers, we're also making meaningful investments in technology, artificial intelligence and data to enhance our operating model.

These investments are designed to give our bankers better information, faster insights and simpler processes so they can spend time doing what differentiates Origin: building deep relationships with clients. We believe these investments will improve productivity, enhance decision-making and allow us to scale the franchise more efficiently.

Finally, I want to spend a moment on culture because I believe it is directly connected to the financial results we are producing. As highlighted on Slide 7 of our presentation, our most recent Glint survey produced the highest scores in our company's history across culture, engagement, employee satisfaction and willingness to recommend. These results are among the top 10% globally across all industries and reflect years of intentional investment in our people, our leadership and our values.

As our industry continues to evolve, I believe that Origin's culture remains one of our most meaningful competitive advantages. I am so optimistic about the momentum we are building and the opportunities ahead for Origin. With that, I'll turn it over to Jim.

Thanks, Lance. We experienced sound and improving credit metrics during the second quarter of 2026. Total past due 30 to 89 days in accruing decreased to 0.06%, reflecting the lowest level over the past 5 quarters. Net charge-offs for the quarter were only $454,000, benefiting from recoveries totaling $2 million. On a percentage basis, annualized net charge-offs for the quarter were 0.02% and 0.08% year-to-date. Nonperforming assets decreased $9 million to 0.98% of loans representing the lowest level over the past 5 quarters. Classified assets also decreased to 1.79% from 1.97% as of the prior quarter, a decline of $10.2 million, driven primarily by the downgrade of 4 relationships more than offset by balance reduction in 7 relationships.

For the quarter, our allowance for credit losses declined $827,000 to $98.2 million. On a percentage basis, our allowance reduced from 1.34% to 1.30% of total loans net of mortgage warehouse. As in recent quarters, we did not experience any significant changes in our CECL model assumptions with the primary drivers of the reserve for Q2 being the $5.5 million required in reserves related to new production being offset by the $4.5 million reserve release related to credit migration, including payoffs as well as a $1.6 million release driven by the reduction in historical loss factors within the CECL model.

As to total ADC and CRE and as we have shared on previous calls, 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 51% for ADC and 237% for CRE. We continue to be pleased with the sound credit performance of our portfolio.

I'll now turn it over to Wally.

Thanks, Jim, and good morning, everyone. Turning to our financial highlights. In Q2, we reported diluted earnings per share of $1.09 representing our strongest quarterly earnings performance since Q4 of 2021. Net income totaled $33.8 million, resulting in a return on average assets of 1.35% well above our 1.15% near-term run rate objective and another meaningful step toward our long-term goal of becoming a top quartile performer. On a pretax pre-provision basis, ROA was 1.73%.

As you can see on Slide 26, notable items were negligible during the quarter, resulting in no impact to EPS. On the balance sheet side, loans grew 2.7% sequentially and 1.9% when excluding mortgage warehouse. Total deposits declined 0.6% during the quarter, consistent with seasonal trends. Importantly, noninterest-bearing deposits grew 9.6% sequentially and 5.2% on an average basis, ending the quarter at 26% of total deposits or 25% on an average basis. Moving forward, we continue to target loan and deposit growth in the mid- to high single digits for the year, though we are still tracking towards the higher end of the range.

Turning to the income statement. Net interest margin expanded 21 basis points during the quarter to 3.92%, substantially exceeding our expectations entering the quarter. This expansion drove a 5.7% sequential increase in net interest income to $92.2 million despite a 1% decline in average earning assets. Margin expansion was driven by a combination of improved loan yields, slightly lower cost of deposits and runoff of excess liquidity due to normal seasonality in our deposit portfolio during the quarter.

Moving forward, we have removed any Fed rate actions from our forecast for the remainder of the year, and we expect margin will remain relatively flat. Combined with our balance sheet growth expectations, we now anticipate net interest income growth in the high single digits for both the full year and Q4 over Q4.

Shifting to noninterest income, we reported $15.4 million in Q2. Excluding notable items, noninterest income decreased from $16.4 million in Q1 primarily due to normal seasonality in our insurance business. We continue to track toward the lower end of our prior noninterest income outlook, resulting in an adjusted outlook for full year noninterest income growth in the low to mid-single digits, with Q4 over Q4 growth in the low single digits when excluding notable items.

We reported noninterest expense of $64.4 million in Q2 excluding $0.1 million in net expense from notable items in Q2 and $1.0 million in Q1, noninterest expense increased to $64.3 million from $62.8 million in Q1 consistent with our expectations. Our expense growth outlook remains mid-single-digit growth for both the full year and on a Q4-over-Q4 basis after excluding notable items. Notably, we are maintaining our run rate ROA expectation of at least 1.15% in Q4 and a pretax pre-provision run rate ROA in excess of 1.72%, though we are tracking ahead of these targets.

Lastly, turning to capital. We note that Q2 tangible book value grew sequentially to $36.37, the 15th consecutive quarter of growth and the TCE ratio ended the quarter at 11.1%. During Q2, we repurchased 217,034 shares at an average price of $46.60 while maintaining all regulatory capital ratios above well-capitalized levels. Notably, the Board increased our share repurchase authorization by $100 million, leaving $121.6 million in remaining authorization. During the quarter, we also continued returning capital through our recently increased quarterly dividend. We believe our balance sheet, earnings profile and capital position provide us with significant flexibility as we continue investing in growth while also returning capital to shareholders as appropriate.

With that, I'll turn it back to Drake.

Thanks, Wally. Over the past several quarters, we've talked extensively about Optimize Origin and the transformation across our company. Today, we're seeing what that transformation looks like when it's more fully reflected in our financial performance. This quarter wasn't simply about reporting strong earnings, it was about demonstrating that we can consistently produce higher levels of profitability while remaining disciplined in how we grow, how we manage risk and how we invest in our people and our communities.

I'm extremely confident in Origin's future. Our markets present outstanding long-term opportunities. We are attracting talented bankers and high-quality clients. Our investment in technology and innovations are improving on how we serve our customers and how we operate as an organization. And perhaps most importantly, we are executing at a high level of discipline. When I step back and look at Origin today compared to 18 months ago, I see a fundamentally different company.

Through Optimize Origin, we become more disciplined in our execution, more intentional in our investments, more data driven in our decisions and more focused on long-term value. The results we're discussing today aren't the destination. It's evidence that the transformation is working. Thanks for being on the call. We'll open up for questions.

[Operator Instructions]

Our first question comes from Matt with Stephens.

Start on the loan growth front. Another quarter of solid loan growth. I think based on Lance's comments, a lot of that growth was in Texas and also in the Southeast markets. Just any more color you can share about the loan growth, the loan pipeline from here? And specifically, what you're seeing around loan pricing. I think Wally mentioned in the second quarter that the loan yields improved. Anything to call out there?

Thanks. Yes, we're incredibly proud and optimistic at the same time of what we're seeing on the loan side. Really a combination of the fact that we really just have dynamic markets that we're working in and in Houston, Dallas, our investments we made. I actually saw a chart the other day, Matt, that KBW put out, talking about dislocation markets across the U.S. and the #2 market was Houston, the #4 market was Dallas, the #6 market was Birmingham.

So I think it aligns with where our investments are, where we're focused on lift-outs, where we're investing in teams, and I think that makes a ton of sense. We've actually had loan growth in all of our markets, but the primary driver has been in Texas and the Southeast, as you would expect.

We're very, very granular in what we're seeing across those footprints. I mean our average loan size is still about $590,000 going through with Preston and Jim, kind of the industries of the markets that we're seeing those come across. More than 50% of our loan growth has been C&I for the year.

The CRE is exactly what you would expect for us and it's been reflected in our credit quality. So just incredibly positive. On the pricing side, our new loans for the month -- the most recent months were coming in at about 6.4%. So the discipline has been strong. Really proud of our bankers and what they're accomplishing. Seeing just full relationships, I mean, treasury management revenue continues to grow about 15% annualized. So just an incredibly positive story there. Clearly, we are seeing pricing pressure from our competitors on sort of the loan and the deposit side. And we're also starting to see term pressure.

I would say, looking at some larger relationships across the market, we're seeing a lot of our competitors sort of offer nonrecourse and more regularly than we've been seeing before, but that's not the way that we've modeled our business. I mean we're pretty conservative on our credit culture and our credit quality. So I think we'll continue to do that.

That being said, the pipelines remain very strong because of the market, but also because of the lift-outs. We've done a good job, as we talked about now, I think it's 27 hires this year, being very strategic with those hires. At this point, only $12 million of our loan growth has come from bankers that have been hired in 2026. So I think the theme for us continues to be ROA ramp, but at the same time, investing in future revenue streams.

Okay. That's great, Lance. Appreciate the commentary on that. And then I guess, if I were to switch over to deposits. I'm curious about deposit pricing. Obviously, we didn't see any deposit growth in 2Q from the seasonality that Wally mentioned. But I think the guidance implies you do expect some good deposit growth in the back half of the year. So just any more color on what you're seeing on deposit growth in the back half of the year and where you expect it to come from? Just trying to get a better idea of if we should anticipate your average deposit cost moving higher from here?

Yes. The most recent kind of new deposit costs for us are about 2.7%, that didn't surprise us. As we've talked about a lot, as you know our story, the seasonality there with being here for over 100 years, we have deep relationships with community partners. So our public fund portfolio kind of moves down in the second quarter, we'll see it ramp back up in Q4 and Q1 of next year. Also with the balance of C&I that we have, tax dollars affect us in Q2, probably more than other banks. But overall, deposits is a big positive story for us. I was looking at year-over-year, we've had about 7.5% growth in deposits, so a little over $600 million, but the exciting part was that 23% growth in NIBs. I think that kind of goes back to using data the way we're using it to focus our bankers on C&I growth and C&I clients.

The interesting story is just how real dislocation is in our markets. I was looking at new deposit account openings and that story has been extraordinary. To kind of give you some numbers. I mean we opened over 1,800 new deposit accounts in June. Go back 12 months ago, that was right under 1,000. So I mean, literally almost doubling the new deposit accounts we're seeing. And I would say while that is a combination of lift-out, it's also extreme effect of what we're seeing as far as dislocation, new client acquisition, client dissatisfaction in the market from some of our competitors that is ramping every month, and I think that's going to continue to be that. So while our loan pipelines are good, I'm confident in our ability to fund that.

Our next question comes from Woody with KBW.

I wanted to follow up on the noninterest-bearing. And have you noticed -- as you noted, the growth you saw in the quarter was really impressive. And I was just wondering how sticky do you think that, that growth ultimately is? Because it does feel like if it is sticky, then that could be a positive to total cost of deposits next quarter.

Yes. Woody, I think the -- there's -- between lift-outs and between market disruption, but our focus on C&I and the impact that these noninterest-bearing accounts and relationships are having, I think, are extremely sticky. I think that's why I feel the focus we have on growing that side of the business and how our lift-out strategy is focused on C&I lenders is really starting to pay dividends. So I think it's one of the stickiest dollars we have other than through the utilization of those into the company's investments and those type of activities. But we're really pleased with that growth on the NIB side.

Got it. And then maybe if I could shift to fee income and just I wanted some color on the Argent fees this quarter. It looks like it took a step down and just was curious on the outlook there.

Yes. Woody, so we book the Argent -- our portion of Argent income on an estimate basis and from time to time, we just have to adjust the estimate for -- based on actuals. And I would just say that since Argent's acquisition of the Huntington Trust business, their earnings have been a little bit more volatile. But net-net, our outlook for the year remains unchanged, right, in that kind of $5 million to $6 million range, which we've spoken about consistently.

Okay. Got it. And then maybe just last for me, just curious, given all the growth momentum you have, it feels like a $10 billion cross is likely this year. Is that still the plan? And can you just remind us on the impact of Durbin and some of the levers you have to help offset that?

Yes. We've completely crossed -- I mean we're over the 10b mark, we're there. Great relationship with everyone working towards making sure that we're prepared and behind -- have most of that behind us. Durbin Amendment impacts us midyear next year, and that's going to be in the $4 million, $4.5 million range, but we're working feverishly to have other opportunities replace that. Originally, the wonderful relationship we have with our Argent partners and what they were able to -- what they -- it's amazing what they're -- how they're growing the company and how impactful they are.

That was always a plan for us to utilize that relationship and the equity method of accounting to be able to offset the Durbin impact, but we're there. We're over 10b. We have great growth. We have most of the cost behind us, obviously. We will continue to improve our audit process, we still have some investment there and certainly IT audit in some areas like that. But we're in a good place today and have the majority of the 10b cost behind us.

Our next question comes from Michael with Raymond James & Associates.

Just wanted to go back to the loan side. Obviously, I understand that not much of the growth has come from the hires that you've put on the books this year? I also saw that you just opened the Birmingham market, which is good to see. You're already talking towards the upper end. It does assume some deceleration in the back half of the year. I guess what's driving that? And I guess the real question is, is there potential upside to that outlook just based on all the commentary pipelines, hiring, kind of, et cetera?

Yes. Thanks. Good question. Yes. What is hard for us to control, obviously, is competition when it comes to sort of terms and rates. And so that kind of makes us stay to that sort of mid- to high single digit. But you're not wrong in the sense that everything we're seeing from a pipeline perspective, especially once we get past kind of non-solicitation time frames on these new hires, I agree with you. I couldn't be more excited for Will and the team that we hired in Birmingham and the business that they're going to build there.

We've had, as I talked about 12 new hires across our footprint, excited about what we're doing in East Texas. So I am also very optimistic and think that there's upside to what we're doing, and it's going to just be really subject to kind of the battle around terms and rates on some of the bigger C&I stuff, but I feel confident in our ability there.

Helpful. And then maybe one for Wally, just as it relates to the margin. I'm sorry if I missed this, but any one-timers in there this quarter because the guide just to get to the kind of -- I know it's plus or minus 5 bps, but if I were just to get to the 3.85%, it would imply some downside from here. So just wanted to understand the puts and takes.

Right now, in our modeling, Michael, we're modeling margin will be essentially flat to the second quarter, in the third and fourth quarters. The second quarter did have some interest reversal or recovery on nonaccrual loans. That was about 3 basis points of benefit. We've got, call it, $0.25 billion of fixed rate loans that will reprice or pay off in the back half of the year, we're picking up based on current pricing, about 160 to 170 basis points on those. In our securities portfolio, we have about $35 million to $40 million of principal roll off each quarter. We're picking up about 100 basis points as we reinvest those monies. So there are some good tailwinds to help for NIM, but we are modeling that deposit pricing pressures and loan pricing pressures will be somewhat of an offset of that.

So I would say the real big thing that would kind of shift that plus or minus 5 basis points is really liquidity. You saw -- if you look at our average cash balances, they declined about $400 million during the quarter, which was a pretty meaningful positive impact to net interest margin. If seasonality builds or we have large success bringing deposits on faster than loans. So you could see some pressure to net interest margin, but that would be very positive to net interest income. So we'll take that pressure.

Our next question comes from Gary with D.A. Davidson.

I want to kind of go back to the loan yield conversation earlier. I think you kind of suggested what you're seeing this quarter. But I'm curious, given the benefit to NIM from loan yield pickup in the second quarter, if you could give us a sense of kind of what the origination yields were in the second quarter versus what you saw in the first quarter.

So as Lance mentioned, our new loan pricing has been right around 640, and that's been pretty consistent. We'll have 5 to 10 basis point swings depending on mix from month-to-month, but pretty consistently around that 640 range this year, every month.

Okay. So you had -- you've not really seen much in the way of spread compression really evolving recently? Is that kind of the read?

Yes. Yes, we have not, but I think that's kind of a function of we've stayed pretty disciplined on that as we are seeing competition out there, you are seeing banks take lower SOFR spreads than we've been doing. So you got to feel it on the horizon, but at this point, it hasn't affected us.

Okay. I appreciate that. And you talked many times over the past several quarters about kind of the market opportunity, you mentioned dislocation several times on today's call, and obviously, the recruiting strategy has played out well. Can you talk about expectations around that for the back half of the year?

Yes. I think it's still our #1 priority. As we think about the opportunity we have today to really create transformational growth for us in franchise value through market share growing what I think is kind of the best markets in America right now. So I kind of made the comment last quarter. I think it felt like last year, I was spending all my time focused around efficiency opportunities. Right now, I'm spending all my time around recruiting, and I think that's a good place for us to be. It's not 13-person teams as we may have done 5, 10 years ago, this is 2s and 4s, but it is very strategic and very disciplined on bringing in C&I bankers, bringing in treasury management officers, deposit specialists as we want to think about how we grow this. We talk about it a lot internally about a unique point in time right now where we can ramp ROA.

At the same time, we're making investments in technology and automation and artificial intelligence. Our new CTIO has been transformational for us. But the pipeline of opportunities we have there really focusing around renegotiating -- we've renegotiated our 2 largest technology contracts in the last 6 months. It's really clicking on all cylinders right now.

[Operator Instructions]

Our next question comes from Stephen with Piper Sandler.

I guess one thing, and apologies if I missed it, but obviously, you took up the repurchase authorization. How can we think about the potential pace of the repurchase? How aggressive do you think you could potentially be? Maybe how price sensitive? And are there any kind of internal impediments and whether it's cash at the holding company or otherwise that may keep that more muted than we would think otherwise?

Stephen, thanks for the question. So to answer the last part of what you said first, we have -- our buyback has been really kind of driven by the cash at the holding company that we're allowed to push up from the bank. Remember, we repaid about $150 million of sub-debt. And so that hampers the amount of cash that we can dividend up, those constraints are now generally lifted. We think now valuation will become the bigger driver of volume that you'll see in the buyback, sub 1.5x tangible, the math still works for us. Over 1.5x tangible, the math becomes a little bit more squishy.

Okay. Great. That's very good color. Thanks, Wally. And then you noted, I think at least an ROA of 1.15% in the fourth quarter of this year. I guess if everything goes right and the pace of new hires continues and -- I mean the trend line you guys are on has been tremendous. So is there like a stretch goal that you guys have out there? Or hey, here's -- again, if everything goes right, here's where we could be in the fourth quarter. Here's what we think could be possible maybe even in '27. Can you speak to maybe Goldilocks scenario potentially?

Stephen, it's Drake. Certainly, we've discussed openly, our desire to be in the top quartile performers. And we feel like in the next 3 years, we can achieve that. We understand where we are today. We certainly have our sights set for what we had planned on ending the fourth quarter run rate for this year. That's certainly in hand, and we feel like we're going to be able to maintain that. We are continuing to invest in this business because of the opportunities we have. But we have to do it at a pace where it doesn't impact significantly our ROA hurdle points.

To get to the point where we want to be next year, we do feel like there is going to be some pricing pressures and potentially some NIM pressures in '27, which might slow that pace down. But everything we're doing organically internally is focused on these hurdle points of achieving these ROA run rates. So I feel confident in where we can be at the end of '27. It's a little murky because of our opportunities in this footprint.

And we are going to take advantage of those opportunities. But again, not going to be an institution that tells investors, hey, we had this plan but boy, we did all this investment. But we also, on top of the opportunities we have in the market, we are focused with, like Lance said, with our new CITO, and focused heavily on ensuring that the transformation of technology in this organization creates value immediately for us. That is a focus through '27. So all the moving parts, I think we can hit our hurdle points and in the next 3 years, be in the upper quartile of performance of our peers.

Yes. That's fantastic. And I guess, if I'm hearing you correctly, Drake and the team. It sounds as though you're not going to let maybe a little bit of a near-term potential drag in expenses being impediment to taking advantage of the dislocation opportunity and the hiring opportunities. That would be -- it sounds like maybe focus one, taking advantage of the opportunity and building the franchise for the long term and you'll earn back that expense over time. Is that the right way to think about how you'd approach opportunities?

Yes. I would just finish that sentence with, but ultimately, not at the expense of our ROA run rates that we're attempting to achieve.

Our final question is a follow-up from Matt with Stephens.

Yes. Just one more follow-up here. On the market disruption, you quantified the new hires in the first half of the year. Is it fair to think that, that pace could continue the back half of the year given the conversations you're having at this point? Or is the bulk of the disruption from as far as new producer hires now in the numbers? And then part two, I guess, remind us of just the overall number of producers you hire you have right now, just to put it in context, the 27 you've hired so far this year.

Yes. I don't know that it's going to continue at quite the same pace, but there is going to continue to be new strategic hires across the market. I'm incredibly confident in that. Now can I say we're going to do 27 in the back half of the year like we did in the first half, I wouldn't think so. We're just being -- trying to be really smart about that. And obviously, Birmingham was the big emphasis for us.

Yes, as we talked about, Matt, I think when we started Optimize, we were like in the 123 producer range. Right now, we're right under 100 and with these new hires because at the same time, we're still actively managing through our data, our profitability models. We're actively managing lower producers just as we're bringing in higher producers. So we're going to continue to do that. That's going to continue to be a focus for ours. Our geographic delivery model, our culture, people really like the idea of coming to work for us. So there's lots of exciting conversations happening right now.

It appears there are currently no further questions. Handing it back to Drake Mills for any final remarks.

As I mentioned in my comments today, I'm most pleased about our continued ability to create consistent performance. And I think that's been the missing link for a number of years that we invested in this business, but we are approaching this through a very disciplined position. We feel confident in our growth throughout our footprint as generational dislocation continues to fuel exceptional opportunity.

We are experiencing acceleration of production pipelines as we focus on disciplined pricing. And I would say that's the key. It's not about 10% growth. It's not about -- it's about whatever that growth is at a margin impact. So very pleased there. Our employees have such a deep commitment to deliver on Optimize Origin while maintaining one of the strongest cultures in the industry.

I am extremely pleased with our momentum. I'm extremely pleased with the position we are and the markets we're in and especially the attraction of talent and the traction of new customers. So in a wonderful position. We'll continue to leverage our position to hopefully be consistent in our performance. I appreciate each one of you being on the call today, and thank you for your support and look forward to seeing you in the future.

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

Good morning, and welcome to the Origin Bancorp, Inc. First Quarter Earnings Conference Call. My name is Jen, and I will be your Evercall coordinator. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the call over to Chris Reigelman, Director of Investor Relations. Please go ahead.

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 will refer 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 joining by phone, please note the slide presentation is available on our website at ir.origin.bank. Please also note that our safe harbor statements are available on Page 6 of our earnings release filed with the SEC yesterday.

All comments made during today's call are subject to safe harbor statements in our slide presentation and our earnings release.

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 Brolly; and our Chief Credit and Banking Officer, Preston Moore. After the presentation, we'll be happy to address any questions you may have.

Drake, the call is yours.

Thanks, Chris, and thanks for being with us this morning.

While I'm pleased with the results of this quarter, I'm even more encouraged by the momentum we're building as we focus on developing a high-performing organization through Optimize Origin. Our ROA in the past 2 quarters highlights the level of focus we have in strategically improving performance for all of our stakeholders. In Q1, our ROA was 1.11%, and we are on pace to achieve our target run rate by year-end.

The momentum we spoke about last quarter has only accelerated as we've started the new year. We saw very positive loan and deposit growth for the quarter, which has been disciplined and strategic. I remain encouraged with what I'm seeing and hearing throughout our markets. The growth we saw in Texas and in the Southeast is a reflection of both the strength within those dynamic markets and the generational dislocation that is occurring. This dislocation is creating valuable opportunities to add new relationships, expand on existing ones and add new bankers to our already impressive team.

Lance will provide more detail on this, but we are receiving calls from bankers within our current markets as well as in new markets who have an interest in joining our team. The volume of activity being created by disruption is even greater than we anticipated. Momentum is strong at Origin and is based on our award-winning culture and our drive for elite financial performance through Optimize Origin.

Again, I'm proud of our results this quarter, and I'm optimistic about what we can accomplish.

Now I'll turn it over to Lance and the team.

Thanks, Drake, and good morning. It's an exciting time for Origin. Across our company, Optimize Origin has clearly become the operating system driving more consistent, higher-quality performance. We are seeing Optimize translate into stronger execution, disciplined growth and increased operating leverage.

In Q1, we delivered strong loan and deposit growth. Loans held for investment, excluding mortgage warehouse, increased $200 million or 2.8% quarter-over-quarter. Total deposits, adjusting for deposits sold at the end of 2025 grew $234 million or 2.8%. As expected, this production is being driven out of our Houston, DFW and the Southeast markets. This growth reflects disciplined execution, not opportunistic volume. We remain fully focused on full relationship profitability, balancing loan growth with core deposit generation, pricing discipline and long-term client value. This consistency is critical as we continue to build a more durable and high-performing balance sheet.

As Drake mentioned, the interest we are receiving from high-quality bankers who desire stability, opportunity and a vision for the future has been exceptional. Since the beginning of this year, we have added 15 bankers to our production teams. While our loan growth in the first quarter was strong, it doesn't capture what our new bankers will add throughout the remainder of the year. I'm confident that we will continue to strategically enhance our teams across our footprint during this time of disruption.

Our footprint, geographic model and talented bankers create an environment where I feel confident we will capture our desired growth without needing to take any unreasonable credit or interest rate risk. We have the luxury of not needing to stretch or deviate from our standards or credit culture in any way.

At the same time, we are continuing to invest in the capabilities that will define our next phase of performance. During the first quarter, we hired Brad Waldhoff as Chief Technology and Innovation Officer. Brad has more than 20 years of success leading digital innovation for high-growth companies. He is already partnering with our teams across the organization to align technology, data and AI more directly with business outcomes. This focus on enterprise architecture and innovation strategy is directly connected to driving measurable improvements in productivity, decision speed and quality and enhanced client experiences. Over time, we expect this alignment to enhance our ability to scale effectively, strengthen revenue and risk management and drive better overall returns.

As we continue to Optimize Origin, we are hyper-focused on revenue creation, process improvement, speed of delivery, scaling with discipline and driving elite financial performance. This unique position of a dynamic footprint and ability to take advantage of market disruption through talent acquisition and award-winning culture as well as a commitment to AI, technology and automation is why we are so confident and optimistic on Origin's strategic path. As other financial institutions are consolidating, we are investing in our independent future.

Now I'll turn it over to Jim.

Thanks, Lance. I'm pleased to report continued sound credit metrics for the first quarter of 2026. Total past dues 30 to 89 days increased to 0.22% and compared favorably to an average of 0.25% over the previous 4 quarters. Net charge-offs for the quarter were $2.8 million, down from $3.2 million, and represent an annualized charge-off rate of 0.15% for the quarter. Nonperforming assets increased $6.4 million, increasing moderately from 1.07% of loans to 1.12% and remain below the level of 1.18% reported at Q3 2025.

Classified assets also increased moderately from 1.93% of total loans to 1.97%, an increase of $6.3 million, driven primarily by the downgrade of 9 relationships, partially offset by balance reductions in 6 relationships. For the quarter, our allowance for credit losses increased $2.2 million to $99 million. On a percentage basis, our allowance remained stable at 1.34% of total loans net of mortgage warehouse. As in recent quarters, we did not experience any significant changes in our CECL model assumptions.

As to total ADC and CRE and as we have shared on previous calls, 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 48% for ADC and 233% for CRE. We continue to be pleased with the sound credit performance of our portfolio.

I'll now turn it over to Wally.

Thanks, Jim, and good morning, everyone. Turning to the financial highlights. In Q1, we reported diluted earnings per share of $0.89. As you can see on Slide 25, the combined financial impact of notable items during the quarter equated to net expense of $577,000, equivalent to $0.01 of EPS pressure. On a pretax pre-provision basis, we reported $40.2 million in Q1. Excluding notable items, pretax pre-provision earnings were $40.8 million and annualized pretax pre-provision ROA was 1.61%.

On the balance sheet side, loans grew 2.5% sequentially and 2.8% when excluding mortgage warehouse. Total deposits grew 5.4% during the quarter. However, on the last day of the year, we sold $215 million in interest-bearing deposits. These deposits were repurchased 2 days later. Excluding this sale, deposits would have increased 2.8% during the quarter. Noninterest-bearing deposits grew 4.2% sequentially and ended the quarter at 23.6% of total deposits. Moving forward, we continue to target loan and deposit growth in the mid- to high single digits for the year, though we are clearly tracking towards the higher end after Q1.

Turning to the income statement. Net interest margin contracted 2 basis points during the quarter to 3.71%, in line with our guidance of slight compression. Moving forward, we expect margin will bounce back in Q2 by about 10 basis points, plus or minus, as excess liquidity from seasonal balances in our public funds customer accounts runs back off, leaving average earning asset balances roughly flat.

By Q4, we continue to anticipate NIM in the 3.7% to 3.8% range with current bias remaining at the higher end. Our outlook now includes 25 basis point Fed rate cuts in July and December. Combined with our balance sheet growth expectations, we continue to expect net interest income growth in the mid- to high single digits for both the full year and Q4 over Q4.

Shifting to noninterest income. We reported $16.8 million in Q1. Excluding $438,000 in net benefits from notable items in Q1 and $483,000 in net benefits in Q4, noninterest income increased slightly to $16.4 million from $16.3 million in Q4 as $3.3 million in net losses on limited partnership investments offset the seasonal strength in our insurance business. We are maintaining our outlook for full year noninterest income growth in the mid- to high single digits with Q4-over-Q4 growth in the low to mid-single digits when excluding notable items, though we are currently tracking on the lower end.

We reported noninterest expense of $63.8 million in Q1. Excluding $1 million in expense from notable items in Q1 and $1.3 million in Q4, noninterest expense increased to $62.8 million from $61.5 million in Q4. Our expense growth outlook remains for mid-single-digit growth for both the full year and on a Q4-over-Q4 basis after excluding notable items. Notably, we are maintaining our run rate ROA expectation of at least 1.15% in Q4 and a pretax pre-provision run rate ROA in excess of 1.72%.

Lastly, turning to capital. We note that Q1 tangible book value grew sequentially to $35.61, the 14th consecutive quarter of growth, and the TCE ratio ended the quarter at 11%. During Q1, we repurchased 165,500 shares while maintaining all regulatory capital ratios above levels considered well capitalized, as shown on Slide 24 of our investor presentation. Furthermore, we announced yesterday the Board's approval of an increase in our quarterly dividend from $0.15 to $0.25. We believe this decision, combined with our continued share repurchases is a reflection of both the strength in our capital levels and a more consistent earnings stream to support dividend payout levels closer to peers.

With that, I'll now turn it back to Drake.

Wally, thank you. Optimize Origin continues to shape how we operate, how we allocate capital and how we think about long-term value creation. Over the past few years, we've invested in top-tier talent, infrastructure, technology while strengthening our culture. My optimism is based on our focus and our ability to execute. We will remain strategic and deliberate in how we drive value for our stakeholders.

Thanks for being on the call today. We'll open it up for questions.

Thank you, Drake. [Operator Instructions] Our first question is from Matt at Stephens.

I have a few questions around loan growth. Just looking for more color around the drivers of what we saw in the first quarter. It looks like it was a lot of CNI, I think, mostly in Texas. Just any more color on what you saw there and kind of how the pipelines look today? And then secondly, we've heard a few of your peers in Texas mentioned that loan pricing continues to tighten for a handful of the CNI segments in Texas. Just would love to know kind of what you're seeing there.

This is Lance. Thanks for the question. Really excited about what we produced in the first quarter and what we see from a pipeline and a forecast perspective for the rest of the year and going forward. You were right. It's exactly what we would hope it would be. I think $184 million of the growth was in CNI, Texas and the Southeast, where we've been making our big investments, were the huge drivers of that. Houston did a great job. We're really seeing the increase now from Nate and his team in the Southeast as well as that's really coming through.

We are seeing competitive pressures on pricing. I will say, for the first quarter, I thought we did a really good job of being disciplined. We were seeing new loan pricing come in between about 6.3% and 6.5%, which I feel is really good. As I said in our commentary, I feel like our footprint, our investment in bankers, gives us a little bit of luxury that we don't have to reach as much. So I'm proud of our teams. I'm proud of our credit officers for the discipline that they're driving.

The mix of the loans as far as industries was really spread out, pretty granular, pretty typical to what you would see from us. There were some industrial services, transportation, construction, construction equipment, a little bit of clean energy, renewable stuff that we saw, so a little bit across the board that we feel good about. I think we had talked about $190 million pipeline in Q1. So we were kind of right at that level. We're seeing about $150 million to $160 million pipeline for Q2.

We've had good success kind of through the first part of the quarter, and I think that, that's really going to pay dividends. And as we talked about, I'm going to say that the growth that we've seen so far is organic completely, not a function of new hires or disruption yet. And so that investment for us is going to really pay dividends in the back half of the year and for the next couple of years, as that investment continues to pay off.

Okay. I appreciate the color there, Lance. And if I could switch gears over to the capital side. I think Drake noted some good capital actions during the quarter, the Board approved the dividend that we'll see here and also bought back some shares in the first quarter. Just would love to hear updated thoughts around capital priorities. Are there certain capital levels you're targeting? And at what point does M&A come back into play?

Yes, Matt, thank you. Our capital deployment outlook is pretty much as it has been. I mean we are -- we feel like we're first in a position of luxury from the standpoint of strength of capital. But obviously, growth is our major emphasis on capital deployment. But on the second -- on the other hand, we have to become more peer-like in how we utilize capital, especially excess capital. We're very pleased with the approval, the increase of dividend. That will give us an opportunity to continue in the next several years to be peer plus like in how we manage capital return. But from a buyback activity standpoint, we are focused on, as we always have been, not just ROA, but ROE and how do we manage capital from a perspective of shareholder return, but yet at the same time, get this ROE number up.

And so our deployment is going to be the same. We're very pleased with the levels of growth that we're seeing in all markets, and we'll continue to focus on that. But at this point, we're in a, like I said, a position of strength. We have significant confidence in our earnings durability, which gives us the opportunity to move forward with increased dividends. And ultimately, as I said, there's going to be a desire to continue to deploy this through organic growth, and we're seeing some significant opportunities on markets.

And Drake, the last part of that, can you address M&A for the bank?

Yes. For us, I think the best plan is for us to grow -- we've got a nice opportunity to grow organically. M&A is just not on the table at this point. We've got too much opportunity to maintain awesome culture, strong credit quality. The growth we're seeing is high quality. So we're going to take advantage of this organic growth, this lift-out opportunity, really do the things that we've done for years that's made us who we are, but focus on a disciplined approach of return and profitable growth. And I think that's going to be the driver that keeps us out of the M&A game.

Our next question is from Michael at Raymond James.

I was trying to write down some of the commentary, Wally, that you provided around NII and fees. I think what I'm hearing is that the margin should maybe be towards the upper end. Does that imply that the NII should also be kind of towards the upper end of the range? And then I think I heard that fee income would maybe be tracking towards the lower end of the range, but the full year revenue should kind of balance out. Is that broadly kind of the way to think about it?

Generally, I would say, yes, Michael. The NII would certainly be tracking towards the higher end, especially if loan growth and NIM is tracking towards the higher end of guidance. On the fee income side or the total revenue side, NII is obviously going to be the biggest driver of our total revenue growth. So even with our fee income tracking towards the lower end, primarily a result of the losses on the LP investments in the first quarter, that's still -- the total revenue still looks stronger due to the NII strength.

Okay. Helpful. I appreciate that clarification. And then Drake, maybe for you, obviously, the Optimize Origin efforts, I know it's been a lot of work to kind of get where you are, but it seems like the momentum is really beginning to build here, and I think you'll have more progress as you move into next year. Just as you think about some of those efforts and maybe finishing kind of the job, kind of where do you see the company over the next 2 to 3 years? I know you've talked about prior getting back to kind of a top quartile performance. What needs to happen from here to really kind of get there because it does seem like the bar has certainly moved higher? So just trying to balance what you've laid out already with kind of what's to come and how we get back to that top quartile profitability.

Well, thanks to Lance and his team, Optimize Origin, and I love how Lance refers to it as our operating system. And it's not a project. It's not a point in time. It is literally how we look at this company moving forward. And I think to answer the bulk of your question, organic growth at the levels we're seeing today, maybe a little less, have to continue for us to be able to get to the point of a top quartile performer, and we are very confident in that. That's why we're seeing a significant balance in the opportunities we have at this point for teams that are contacting us. We are looking at what is the impact to our financial model and our ability to hit these targets from an ROA standpoint in the next couple of years, but yet balance bringing these teams in. And so we're looking at teams that have significant CNI focus, that have funding capabilities themselves, that have longevity in their relationships with significant credit quality because ultimately, a derailer, if we have the growth is the credit quality aspect of it. So we are so focused on high-quality growth.

We're focused, as Lance said, on discipline, pricing and profitability. And so if we can continue managing Optimize Origin as, say, our operating system and our entire organization buys into that, then we'll see high credit quality. We'll see pricing discipline that will allow us to stay in the game, and we'll see growth that matters. So I would rather take a 6%, 7% growth that's high quality, high profit versus just throwing up a 10%, 12% growth.

So I see a company that's growing at this 8% to 10% level in the next couple of years with significant discipline, high-quality credit and earnings power that continues to grow. So with those factors, I've got a lot of confidence in our ability to be an upper quartile earner in the next 3 years and continue with being a disciplined performance company.

Yes. I might want to add to that. That was a great answer, Drake. The back end of it, through the lens of Optimize, is really trying to continue to identify lower returning sections, markets, bankers, clients, products, understanding where our expenses are, how we can take advantage of the market and move expenses into what I'm going to call future revenue streams. And so right now, with the emphasis on artificial intelligence, we have taken advantage of a window to really dig into contract renegotiations with technology vendors and are having a tremendous amount of success. And that in the moment, not just for the -- not just to cut costs, but then to be able to reinvest those dollars into future automation as well as future investments in banking teams that are going to drive revenue. They're going to push us forward.

I mean the hire of our new Chief Technology and Innovation Officer points to that, the real emphasis on data and how decisions are made through automation, through speed of delivery, process improvement. We are doing a deep dive inside the organization on all things along this journey and personalization for the clients so that we're delivering in a cheaper manner and we're driving this that's really pushing ROA significantly.

Our next question comes from Stephen at Piper Sandler.

I wanted to dig into some of the guide a little bit more, just particularly around the deposit growth. Does that kind of guidance account for the movement we saw around year-end and the beginning of the year, with managing around the $10 billion in assets?

Yes. So just to kind of give you some thoughts around maybe how the deposit growth will trend, the first quarter is always a seasonally strong quarter for us. Our public funds customers, especially in Louisiana, have a lot of inflows from tax receipts. Those deposits then run off in the second quarter. So the second quarter is typically down slightly, and then we build back up in the third and fourth quarters.

So yes, if you look at the guide, that mid-single -- mid- to high single-digit guide would be on the higher end if you don't add back the deposits that we sold at the end of 2025.

Got it. And then, Wally, I think I heard you say that the NIM guide currently assumes 2 cuts in July and December. Would there be any material change to the path for the NIM if we do not get any cuts this year?

So we have about $350 million or so of loans that are maturing for the rest of this year. Those loans on average are priced around 5%. As Lance said, we're pricing -- in the first quarter, we were pricing new loans in the 630 to 650 range. So if the Fed doesn't cut and we don't see meaningful spread pressures, then we'll pick up an extra 25 basis points or so on those loans that are repricing.

We've moved cuts from March and June to July and December. And so that's -- that would be in the guide. So the December cut is not going to impact the guide that much. So if the July cut comes out of our guidance, then we'd have a little bit of extra boost from those $350 million or so of loans that are repricing. Not hugely material.

Yes. Makes sense. Okay. And then just last thing for me. Obviously, Texas clearly represents the lion's share of loans today. And can you give us any kind of color into what you're seeing in DFW, Houston markets in terms of demand and maybe impacts from continued dislocation with deals in those markets and kind of how you would expect that concentration of loans to the Texas markets to continue as we move forward?

Yes, you're 100% right. Our teams are doing a great job. As we talked about, think $160 million of the CNI growth came out of the Texas market in Q1, and the pipeline would look very similar to that as far as the mix. But also on the deposit side, I mean, we grew $200 million in deposits in Texas. And the exciting part of that is because of the CNI focus we have in those markets with our operating companies, the NIB percentage in Dallas and Houston is clearly higher than other markets across our corporation. So they've actually worked and done a great job now that their total deposit costs in Dallas and Houston are the cheapest that we have, which is crazy to think about. They've done such a good job. A lot of TM revenue that's flowing through there.

From a dislocation perspective, you're right. I think Drake used the term generational. I can tell you that we're feeling it in a significant way. A year ago, I was spending all of my time around Optimize and sort of resetting, thinking through cost reductions. I can tell you right now, I'm spending all my time recruiting. We're having significant and meaningful conversations across our footprint, literally in every market. Of the 15 new production hires that we had in Q1, I think it's lined out exactly like you would hope it would be. It was 6 in Houston and 6 in North Texas. The opportunities we're seeing, and think hopefully, we'll be announcing very soon, are going to really move this company forward.

I would also say that we see significant opportunity in the Southeast market. That they're maturing and coming into their own, conversations that are being had. So while Texas clearly is the driver for us, the Southeast is going to pick up dramatically.

[Operator Instructions] Our next question comes from Gary at D.A. Davidson.

I had just another question about the CNI growth in the quarter. Do you have a sense of kind of how much was new customer generated versus increased utilization among your existing customer base? Is there any sense that there's a pickup in company investment to take advantage of the tax bill and accelerated depreciation or anything along those lines?

Yes. I don't have an exact number for you, but I will tell you kind of going through loan committee and going through pipelines, looking at that, I think you're right. I do think the vast majority of it was more business from existing customers. I mean we are actively working with our business development officers and TMOs and bankers to make calls and bring in new customers, and that will pick up even greater with these new hires that we're bringing on new clients. But the vast majority of this is additional business in Texas. And I think you're right. I think there's incentives to drive new business from this administration that's paying off.

Okay. I appreciate that. And then just another kind of NIM-related question. In terms of the deposit cost side of things right now. You've got obviously some CDs repricing in the second quarter. Just hoping to get a sense of where you -- how much opportunity you think there still is in terms of deposit repricing, let's say, in the absence of rate cuts from here? Or are we pretty near a bottom?

I would tell you that with the last cut that we got, our markets worked very hard to improve pricing. We looked at what we thought were opportunity with some higher cost deposits across the franchise. And I would tell you that absent another cut, I don't see that we have more opportunity to improve those costs. And our goal, part of our ethos, as Drake mentioned, was that to be disciplined around pricing. And as loan growth accelerates, we need to fund that loan growth with new deposit growth.

So I would suspect that we are near bottom on deposits as we have to make sure that we're funding new loans with deposits. New deposits tend to come in a little bit more expensive than your existing deposit base. So yes, I don't think -- I wouldn't model that we have a lot of opportunity on the deposit side from a net interest margin perspective. The greater opportunity is really coming from the repricing of loans, where I mentioned, we're picking up today 125 to 150 basis points of spread.

Appreciate that. And just kind of one more deposit-related question. Have you seen a significant shift in competition around deposit pricing, whether Louisiana or Texas or otherwise?

Yes, it's leaking in. As a matter of fact, I had -- I've got two mailers sitting on my desk right now from competitor banks here in North Louisiana. One was a 3.8% CD, and one was about a 3.55% money market. And so we're fortunate here that we have such a competitive advantage in North Louisiana. I mean obviously, the pricing does matter, but we're being very disciplined on that. We have long-term relationships with these clients. But you are right, as these banks are trying to get growth, they're going to have to fund it somehow. And so the competition is going to be fierce.

And ladies and gentlemen, this concludes the Q&A session. Handing it back to Drake Mills for any final remarks.

Yes. As I mentioned earlier, we have just a deep commitment throughout our company to deliver on Optimize Origin. We have significant momentum in all of our markets, and we're seeing an acceleration of high-quality production, as I said earlier. As we're blessed to be a part of these dynamic markets that are truly experiencing generational dislocation, it has given us opportunities that I just didn't see it as an opportunity in my career. So as we move forward, we are going to be highly disciplined and not only our growth, our pricing, our quality and the decisions that we make that balance growth and earnings momentum.

So I appreciate everybody being on the call. Appreciate your confidence in us, and look forward to seeing most of you on the road in the month of May. Thank you.

Thank you. This concludes today's call. A replay will be made available shortly after today's call. Thank you, and have a great day.

Good morning, and welcome to the Origin Bancorp, Inc. Fourth Quarter 2025 Earnings Call. My name is David, and I'll be your Evercall coordinator. The format of the call includes prepared remarks from the company followed by a question and answer session. [Operator Instructions]. I would now like to turn the conference call over to Chris Reigelman, Director of Investor Relations. Please go ahead.

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 the slide presentation that we will refer to during this call. Please refer to Page 2 of our slide presentation, which includes our safe harbor statements regarding forward-looking statements and use of non-GAAP financial measures.

For those of you joining by the phone, please note the slide presentation is available on our website at ir.origin.bank. Please also note that our safe harbor statements are available on Page 7 of our earnings release filed with the SEC yesterday.

All comments made during today's call are subject to the safe harbor statements in our slide presentation and earnings release. 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; Chief Accounting Officer, Steve Brolly; and our Chief Credit and Banking Officer, Preston Moore. After the presentation, we'll be happy to address any questions you may have. Drake, the call is yours.

Thanks, Chris, and thanks for being with us this morning. This time last year on our call, we introduced Optimize Origin. As we outlined, Optimize Origin was more than a project, it was more than a point in time. It represented an evolution for our company and how we connect our award-winning culture with our drive for elite financial performance.

Our short-term goal was for a 1% or greater ROA run rate by the fourth quarter of 2025. We accomplished this goal. While I am pleased with our results, I'm not surprised how our team delivered. We remain laser-focused on our ultimate goal of delivering a top quartile ROA. Origin has a tremendous amount of momentum as we enter this new year. I'm proud of the progress that we've made and extremely optimistic about our future. My optimism is based on 3 primary themes. First, our team continues to execute on Optimize Origin. Second, we continue to capitalize on the disruption in our markets created by recent M&A activity. And third, we have no barrier to growth as we have properly prepared to pass $10 billion in assets. Our teams and our markets are ready. Now I'll turn it over to Lance and the team.

Thanks, Drake, and good morning. As Drake mentioned, we have a deep sense of optimism for Origin as we enter 2026, and that is felt throughout our entire company. I'm proud of the passion and discipline our team showed in 2025 and the aspirational belief we share together in what we can be as a company. My confidence in what we accomplished is based on our team's unrelenting focus and execution surrounding Optimize.

This past year, we achieved 20% ownership of Argent Financial, consolidated banking centers, restructured the way we deliver mortgages to the market and reduced FTEs by nearly 7%. NII was up 10.2%.

Total revenue, excluding notable items, was up 8.8% and noninterest expense, excluding notables, was down 0.7%. I've said before on our previous calls that I felt our production has been masked by planned reductions due to our client selection process and by payoff and paydown pressures. Even with these dynamics and a data-driven strategic reduction in our production team, loan originations increased approximately $500 million or 37% year-over-year and loan and swap fees increased 57% over the same period. Our continued execution of Optimize Origin is critical to our success.

At its core, Optimize is about simplifying how we work, sharpening execution, eliminating friction and freeing up our teams to spend more time creating value for our clients. Optimize will continue to guide how we improve performance, strengthen accountability and invest intentionally for the future. In late 2024 and 2025, our efforts were primarily focused on balance sheet management and expense reduction. In 2026, we are intensifying our focus on the client delivery model and opportunities for additional revenue growth. As Drake mentioned, the disruption in our markets is a tremendous opportunity for us. Just over the past few months, we've added more than 10 production bankers in Houston and Dallas-Fort Worth and see additional opportunities ahead.

This investment and disruption is a major strategic focus for us in 2026. Our guidance assumes we will invest roughly $10 million in new bankers and banking teams throughout our markets this year. These investments are on top of continued investments we're making across the organization that should drive continued efficiencies and growth as we strive for our ultimate top quartile ROA target.

We feel strongly that the current environment presents unprecedented opportunity for Origin. We are poised to take advantage of it. Now I'll turn it over to Jim.

Thanks, Lance. I am pleased to report sound credit metrics for the quarter. Total past dues at year-end came in at 0.96% of total loans, reflecting no change from the prior quarter. Past dues 30 to 89 days came in at 0.19%, a moderate increase from 0.1% as of 9/30 and compares favorably to a level of 0.24% reported as of the prior year-end.

Net charge-offs for the quarter were $3.2 million, which were in line with expectations and represent a 0.17% annualized charge-off rate for the quarter. During the quarter, nonperforming assets declined from 1.18% to 1.07% at year-end, an approximately $7 million reduction. We did experience a slight increase in total classifieds, increasing from 1.84% of total loans to 1.92%, an increase of $9.3 million, driven primarily by the downgrade of 4 relationships, partially offset by a reduction in 5 relationships.

For the quarter, our allowance for credit losses increased $523,000 to $96.8 million. On a percentage basis, our allowance remained stable at 1.34% of total loans net of mortgage warehouse compared to 1.35% for the prior quarter. As in recent quarters, we did not experience any significant changes in our CECL model assumptions with the actual increase this quarter primarily driven by loan growth. Lastly, as to 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 47% for ADC and 236% for CRE.

We continue to be pleased with the sound credit performance of our portfolio. I'll now turn it over to Wally.

Thanks, Jim, and good morning, everyone. Turning to the financial highlights. In Q4, we reported diluted earnings per share of $0.95. We also reported net income of $29.5 million, which drives a run rate return on average assets of 1.19%, well above the targeted 1% plus run rate that we outlined as our near-term target last January. As you can see on Slide 25, the combined financial impact of notable items during the quarter equated to net expense of $1.7 million, equivalent to $0.04 in EPS pressure.

On a pretax pre-provision basis, we reported $40.6 million in Q4. Excluding $1.6 million in net expense from notable items in Q4 and $7.9 million of net revenue in Q3, pretax pre-provision earnings increased to $42.2 million from $39.9 million and annualized pretax pre-provision ROA increased to 1.7% from 1.63%. On the balance sheet side, loans grew 1.8% sequentially and 1.1% when excluding mortgage warehouse.

Total deposits declined 0.3% during the quarter. However, on the last day of the year, we sold $215 million in interest-bearing deposits. These deposits were repurchased 2 days later. Excluding the sale, deposits would have increased 2.3% during the quarter.

Also, while noninterest-bearing deposits declined 1.0% sequentially, they increased 5.3% on an average basis and ended the quarter at 23% of total deposits after adjusting to include the $215 million in deposits sold and then repurchased. Moving forward, we're currently targeting loan and deposit growth in the mid- to high single digits for the year. We remain optimistic that momentum will continue to build, especially as we capitalize on M&A-driven disruption in our markets. And our expectation is for loan growth to be more weighted to the second half of the year. Turning to the income statement. Net interest margin expanded 8 basis points during the quarter to 3.73%, ahead of our expectations.

Moving forward, we expect slight margin compression in Q1 due to timing differences in loan versus deposit repricing following the recent Fed rate cuts. By Q4, we currently anticipate NIM in the 3.70% to 3.80% range with current bias to the higher end. Our outlook includes 25 basis point Fed rate cuts in March and June. Combined with our balance sheet growth expectations, this results in expected net interest income growth in the mid- to high single digits for both the full year and Q4 over Q4.

Shifting to noninterest income. We reported $16.7 million in Q4. Excluding $483,000 in net benefits from notable items in Q4 and $9 million in net benefits in Q3, noninterest income declined to $16.3 million from $17.1 million due largely to a reduction in swap fee income and normal seasonality in our insurance segment. Moving forward, we anticipate full year noninterest income growth in the mid- to high single digits with Q4 over Q4 growth in the low to mid-single digits when excluding notable items. We reported noninterest expense of $62.8 million in Q4. Excluding $1.3 million in expense from notable items in Q4 and $1 million in Q3, noninterest expense increased to $61.5 million from $61.1 million.

Moving forward, as both Drake and Lance mentioned, we believe there is a significant opportunity facing Origin as a result of M&A-driven disruption across our footprint. Given the magnitude of this potential opportunity, we felt the best strategic decision we could make for the long-term benefit of our shareholders is to invest in the production side of our business. As a result, our expense outlook is for mid-single-digit growth, both for the full year and on a Q4-over-Q4 basis after excluding notable items. Combined with our revenue growth outlook, the end result is the expectation that we will achieve a run rate ROA of at least 1.15% in Q4 and a pretax pre-provision run rate ROA in excess of 1.72%.

Lastly, turning to capital. We note that Q4 tangible book value grew sequentially to $35.04, the 13th consecutive quarter of growth. And the TCE ratio ended the quarter at 11.3%, up from 10.9% in Q3. During 2025, we redeemed roughly $145 million in sub debt and repurchased roughly $16 million worth of our common stock, all while maintaining regulatory capital ratios above levels considered well capitalized, as shown on Slide 24 of our investor presentation. As such, we continue to have capital flexibility. With that, I will now turn it back to Drake.

Thanks, Wally. As we close out 2025, I want to reiterate how proud I am of our team and the results we delivered throughout the year. The initial steps we have taken with optimize Origin have made us a stronger, more resilient and more efficient company. We are entering 2026 with significant momentum, a stronger earnings profile and a sharper focus on our employees, customers, communities and shareholders. I believe there is more opportunity before us than at any other time in my career. Origin is officially on the offensive. Thank you for being on the call. We'll open it up for questions.

[Operator Instructions]. Our first question comes from Matt from Stephens.

I guess I think it was Lance's comments that the bank has already taken advantage of some market disruption with some recent new hires. I think Lance said it was about 10 producers in the footprint. It's great to hear. As far as the expense guidance that you provided, any more color about how many producers this implies that you're targeting for the year? Is it those 10? Or do you expect additional hires? I'm just trying to appreciate any volatility we could see in the expense line item from new producer hires or other items in the expense base?

Yes. Matt, thanks for the question. I'll take part of this and maybe Wally want to jump in on part of this. No, we have a lot of dry powder in that $10 million to be able to hire on top of that $10 million plus. Those are some that we've done in the last couple of months, some here in the recently kind of in the last 30 days. But I can tell you, it's a fun time for us right now. We're having very strategic conversations in every one of our markets with bankers and banking teams.

This is the opportunity for us to really leverage our award-winning culture and our geographic model and kind of build from an organic perspective. So that $10 million that we're talking about, I couldn't tell you if that's another 15 or 20 bankers or what it's going to be specifically, but it's kind of a little bit of a war chest to allow us to accomplish both things we want to accomplish, which is have a nice steady ROA build and at the same time, to invest in future revenue by taking advantage of this disruption. So it's a great spot for us to be in.

Yes. And Matt, maybe I'll just provide a little bit more color specifically on sort of the expense load and how we're thinking about it to help you all out. So look, we have the 10 hires that started late in the fourth quarter or even some were starting early this quarter, January 1 of this year. We also will have our merit increases and cost of living adjustments that kick in, in the first quarter. And then we also have the full impact of payroll taxes that come back in, in the first quarter.

On top of that, if you noticed in the press release when we discussed our fourth quarter noninterest expense, we talked about some increase driven by technology contract renegotiation expense. From time to time, we partner with another party or third parties that will help us renegotiate some of our larger technology contracts. And as part of Optimize, we turned over every stone and took a look at all of our contracts, and we partnered with the firm to help us with some of our larger ones. We completed one of those during the fourth quarter, and we anticipate seeing the benefits of that negotiation beginning to impact the expense run rate this year.

However, we are also in the process of renegotiating an even larger one that we are in the late stages of, and we're anticipating that we will finish that negotiation during the first quarter. When we finish one of these negotiations, there is a sizable upfront expense that gets booked and then you get to see the run rate benefit after that. So to kind of put that all into numbers, I would say maybe we think about a $64 million expense run rate, plus or minus $1 million the first quarter with the -- assuming we close this negotiation in the first quarter and book that fee, it would be on the higher end of that range. And then you'd see the benefits in the second, third and fourth quarter bringing us down at the low end of the range.

And then as we layer on hires, we'll build that expense back up. So think about $64 million and then you all can try to guess as good as we can as to when we'll hire, but we're actively in discussions, and we anticipate that we will continue to be looking for new people to have discussions with as the year progresses, just given this disruption. So that was a lot of words, but hopefully, that helps you all just kind of think about the expenses in your models.

Yes, Wally, that was perfect. Very helpful. Thanks for kind of going through all that stuff. Makes sense. And maybe just one point of clarification for Lance. As far as the new hires as it relates to the loan growth guidance this year, any of those new hires you expect to impact the loan growth guidance in '26? Or is that more of a 2027 impact?

Yes. And Wally you may want to correct me. I think the vast majority of what we put into budget was at the back half or Q4. I mean, as we make these hires, they have nonsolicitation, noncompete language. There's timing around that. So anything that got put in for this year was very much in the back half.

Yes. I would just add, Matt, that the equation for us is how do we balance our desire to improve our profitability run rate while also taking advantage of what looks to be almost a generational opportunity from potential disruption. So known hires, people that we have hired and have started, we budgeted, like Lance said, that there would be impact really, really back-end loaded given the time it takes to get on board and then to start communicating with customers and building new relationships and impacting our balance sheet.

And then unknown hires, it's hard to budget them. So we would anticipate that a lot of the dry powder that Lance referenced would be impacting the 2027 loan growth run rate. So hopefully, we can continue to see our loan growth accelerate in the coming 1, 2 to even 3 years depending on how long we can capitalize on this disruption.

Okay. And then I guess switching gears on the net interest margin, Wally, it sounds like the margin, I don't know, may got of itself in the fourth quarter. It sounds like the loan beta could catch up in the first quarter. Just any more clarification on the margin and what we saw in the fourth quarter and kind of more about what you mentioned in the prepared remarks about the first quarter.

Yes. So thanks, Matt. We do get some timing differential. Our bankers have been very disciplined, and we are anticipating how we're going to move deposit costs before Fed moves. And the cuts that we got in the fourth quarter, we moved deposits on day 1. For the floating rate loans, those loans don't reprice until their next billing cycle. So if somebody got their bill right before the Fed cuts and then they cut, it would be 30 days before we see the impact of that on the loan pricing. So we've already got the benefit of the deposit reset starting to flow through the numbers, but the loan pricing will come down on a slight lag.

So that results in a little bit of pressure in the first quarter. But we still have the tailwinds from assets repricing. In 2026, we've got about $150 million or so of securities that will roll off and that we will replace. We're picking up right now about 50 to 75 basis points on spread on those. And then we've got $350 million to $400 million of loans maturing in 2026.

The average yield on those is about 4.8%. And right now, new yields are in the kind of low to mid-6s. So we're picking up some decent spread on those as well. So net-net, we do anticipate after the first quarter that you'd see margin expand back up to what we provided on the outlook slide, that 3.75 range, plus or minus 5 basis points.

Our next question comes from Michael from Raymond James Financial.

Maybe just following up on Matt's question just around the incremental hires this year. Yes, I think we would agree that there's a lot of potential opportunity here, another deal announced yesterday. What types of lenders -- I assume most of these are lenders are you trying to hire? Any change? And I assume most of them maybe would be targeted in Texas, but there's clearly been some disruption in other areas of your footprint. Maybe if you can just give us some details on kind of what you're looking for? And would you expect that pace of hiring to kind of persist through the year with the potential for more in 2027? Or is this -- and I'm trying to get to the point of like does the expense growth potentially slow as we move into 2027 as you get more positive operating leverage from the plans for this year?

Yes, this is Lance. Yes, very much so. So the strategic identification of kind of bankers that are going to be really effective in our model really are C&I focused with also kind of a focus on deposits and treasury. So of the 11-ish that we've hired so far, it's been, I'm going to say, 2 private bankers, 3 treasury management officers and the rest are C&I lenders.

And I think that will be kind of the mix as we continue to grow as we're balancing really strong core deposit growth along with this loan opportunity. Yes, at the volume of the conversations we're having, I think this is going to be a consistent opportunity for the foreseeable future. I do think operating leverage will continue to enhance for us through this because it's a unique combination right now of our organic pipeline just from the business that we have is really strong and growing.

One of the things we talked about in the last couple of quarters was I really felt like I was seeing really strong originations that was getting masked by some of the credits that we were pushing out as well as sort of unusual payoffs and paydowns. It was interesting to watch this quarter kind of get back to normal.

We saw the highest origination level that we've seen in over 2 years as well as the paydowns and payoffs drop to the lowest level in 2 years. And then looking at what our pipeline is for the next 30 days, like there's a real ramp-up of demand and loan opportunity at what I think are the really disciplined pricing levels. And so I'm very optimistic without the hires of our ability to get that upper single-digit growth, mid- to high single-digit growth and then just sort of gets the accelerator with these new hires that we have targeted. So really, really optimistic around that.

Michael, this is Drake. I also want to -- as you ask about '27 and trying to understand about positive operating leverage, I've been extremely proud of Lance and this bank team because as we bring these hires on, especially as we focus on our ROA hurdles, they are doing an excellent job of continuing to cut out expense out of the organization to cover up some of the costs that we have of bringing these new people in. So it's just not -- we're not sitting here resting our laurels as far as expense management. We're reducing those expenses as we bring these people on. So it somewhat neutralizes that in '27.

Yes. Maybe a data point or 2, Drake, that's a good point. Kind of going back to the beginning of Optimize, we've now reduced our commercial banking team by almost 25%, and that was pushing out portfolios that we just didn't think were going to be the right mix for us or the ability to kind of grow ROA at the level that we needed it done. And it wasn't necessarily to cut expense. It was really to reinvest into better producers, better revenue streams. We're seeing that.

Just last year, the average ROA of our bankers' portfolios increased by 26 bps. And so the work around ROA and the data that Wally and his team are doing is really paying dividends for helping us make better decisions on future revenue growth.

Very helpful color. And maybe just the follow-up here would be -- when I look at current consensus, I'm not saying it's right, but it does show that ROA kind of stagnates in '27. But I think what I'm hearing today is you guys are going to continue to invest, reap those benefits, maybe some of the technology costs come off here, sustainably higher loan growth. I know the peer hurdle has moved to get into that top quartile as well.

So it seems like to kind of get there, you're going to have to do more in '27. Is that the way that we should all kind of conceptually think about it? And then I guess the last piece of that, sorry for so many questions would be the capital build here is fairly meaningful. Why not lean into the buyback a little bit more as well?

Well, first off, as we look into '27, we are going to stay focused on where that peer ROA is and what it takes to get in the upper quartile. And to do that, Optimize Origin, as I said in my opening comments, isn't a project. This is a continuance of how we focus on the profitability and the overall culture of this company. So we will continue to look at fine-tuning.

We haven't talked at all about third-party management on some of these expenses and projects that we have that are still in the pipeline that I think are going to create significant revenue opportunities, but also to enhance as we continue to model things that work and don't work and reduce the expenses on those things that are not. So I'm pretty -- I've got a bullish outlook on '27 is continuing to ramp up ROA and not stagnate. So through that, when you start talking about capital deployment, we do see a significant opportunity with this dislocation in these markets. And we think that growth is going to come at a faster pace than what we are planning at this point just because of the upset in the markets. And what happened yesterday is going to continue to help us in Texas, but it's across our footprint. I've been very pleased with what's going on in Louisiana. So first off, our organic growth story and strategy is in play, and we think it's really going to accelerate.

I love capital, but the reality of it is, I think buybacks are a part of our life today. It makes sense for us. It creates strong shareholder value. But we'll also be looking at dividends, and I think you'll see some opportunities there for us to deploy some capital as we go forward. So we're going to stay focused on 20% of our earnings through going out in dividends. And I think buybacks are here for a while.

Our next question comes from Woody from KBW.

I wanted to just follow up on the disruption. And obviously, it should be a boon for the hiring front. But do you feel the impact of that on the loan competition side? Or is competition as intense as ever?

Yes. Woody, this is Lance. Good question. We were actually talking about that this morning. I would say it is highly competitive, but not irrational is the way I would say it. I think the competitors have been good. I mean, we're starting to see some tighter margins around SOFR quotes, primarily in the urban markets. On the opposite side, the main competition on the deposit side, some of the smaller community banks.

But I don't feel that it's irrational at this point. And I feel like there's still discipline and there's still opportunity to kind of keep growing margin and ROA.

And I love what Lance said because internally, this is about profitable growth. We are looking at total relationships and the market opportunities we have give us the opportunity to be extremely disciplined through this process.

So it's not about total growth. I think we can sit here and grow 15%, 20%. But when we look at our ROA hurdles and what it takes to make a relationship profitable to the point that it accelerates that, that's where our focus is. And I'm really pleased that we have these opportunities and can stay disciplined.

Got it. And then on the deposit side, I mean, you all have been very successful in lowering deposit costs during this current easing cycle. Are we at the point yet where incremental cuts, it gets a little more difficult to lower deposit rates? Or do you think that you can continue these deposit betas?

Yes, I'll let Wally speak to the betas, but I'll just tell you, anecdotally, I feel like we still have opportunity. I think the back half of last year, I think we saw some of the benefit and the power of the rural deposit base we have in North Louisiana. We spend a lot of time talking about Texas as our sort of driving force and rightfully so.

I mean, we grew like loan originations 36% year-over-year and 75% of that was in Texas. But if you step back, we actually grew deposits 14% in Louisiana at our lowest deposit price point across our footprint. So Louisiana continues to pay huge dividends, and that's a big piece of getting our total deposit cost down. So I think there's still opportunity for us to push on that.

Yes. Woody, I would just add, when you think about our deposit betas, we -- in our outlook and internally, when we think about how to model net interest margin or net interest income, we're still using our historical beta assumptions in the model, though we have been beating that so far. It does just -- it does feel like at some point, it's going to get harder to beat that beta.

But it is an area of focus for us. We think it's an area of opportunity for us. So hopefully, we can continue to exceed our own expectations on the deposit beta side of the equation.

That's helpful color. And then just last for me. As I think about like the top end of the range for the net interest margin versus the bottom end, does it really come down to loan growth where if growth is stronger, you all might be on the lower end of that range. And if it's lighter, you all might be at the top. Is that the right way to think about it?

I think that's a fair way to word it, Woody. We don't know how promotional acquiring banks are going to be, and that could put pressure to loan spreads. We are putting some of that in our modeling. But if those pressures increase, then yes, that could put us towards the lower end. And that equation is also true on the deposit side of the equation.

So we're just trying to -- it's a wide range and we get it, but we're just trying to solve for the fact that we just don't know how banks are going to act until we see it. So we'll continue to update you from quarter-to-quarter. But right now, even with some pressures on spreads on both sides of the equation, our bias is towards the higher end of that range, but that could come down if the pressure intensifies.

Our next question comes from Stephen from Piper Sandler.

Not to beat a dead horse on the new hire conversation, but you talked about it being a generational opportunity. So I think it's worth continuing. Can you talk about maybe how you think about the earn-back period or like a breakeven period on these new hires, just how long it takes them once they get past these noncompetes and what have you? And then just how you compete for these folks? Because obviously, everyone -- every bank we talk to is talking about this generational opportunity and the industry is in a great spot, right? Everybody seems to have capital and want to grow. So how do you become the bank that these people want to come to?

Well, first off, I think we're so focused on C&I, owner-occupied CRE and those lenders, they want to be in a shop that does C&I good and it supports the markets. Also, I think we have very good representation in all of our markets. I think about Nate in the Southeast and that has deep relationships with these teams that have worked with them at some point in time. They have respect for our presidents in our markets.

And I think the relationship, the culture, the C&I drive and how we manage our teams is certainly gives us somewhat of a competitive advantage. Through this, we have been pretty focused on 12- to 15-month earnback or profitability levels timing, I should say, on these teams. And where Nate and his team in the Southeast took 18 months, they are now profitable. That was in an environment with higher interest rates and tough to move some credits until maturity.

So we're in a different environment. We like the environment we're in, and we think that we can pick and choose the right people that fit our culture, that fit our philosophies when it comes to lending and are in the markets and the industries that we want to lend into. So I think overall, that gives us a very strong competitive advantage to be successful.

Yes. I might would add just -- I love this opportunity more than I like M&A just because we can really use data to really drive and what type of clients do we want inside of our portfolio, and you can do that kind of from a low-risk environment and identifying and targeting teams. This is where our culture shines. I mean when you're named one of the best banks in America to work for repeatedly and then you combine that with our geographic model, which C&I bankers really like to be a part of that you have an entrepreneurial attitude, not in a siloed line of business, you get to bank your clients.

And so if we can offer a good model, an entrepreneurial organization, somebody that allows them to bank the clients they want to bank from a C&I perspective, really good treasury management tools that allow them to kind of go up market, I think it creates a competitive advantage for Origin.

Yes, that's really good. And Lance, you touched on something that I wanted to hit, and it's like is the use of data. And it seems like a lot of the progress has been aided by really intentional and sophisticated use of data. I'm curious how that has helped shape the composition of your loan growth and kind of what you're focused on and maybe how that shifted from a couple of years ago, whether it's risk-adjusted returns, loan sizes, loan type and just kind of how this Optimized Origin process has changed the focus of the bank as you move forward and how you lend.

Yes. I'm so glad you asked that question. I mean that has kind of become the driving force of what we do. And I give Wally and his team all the credit. I mean, we're -- honestly, we're just a different company than we were 2.5 years ago because of our access to meaningful and actionable data, spend tremendous amount of time digging into portfolio data, banker profitability, client profitability, product profitability. You've seen what we've done with branches. It's just kind of obsessing now over finding ROA enhancement opportunities through the use of data.

Our ability now to kind of design like what a top performer banker looks like for us inside of our model using data. And then the flip side is kind of what the bottom performing bankers look like and then how do you coach from that from a data perspective? Or how do you know it's time to kind of push out and reinvest. So I actually kind of can't give Wally them enough credit for what they've done for us.

It helps drive type of deposit clients we want, our investments in treasury, the loan mix. I mean there's just so much there that is -- we're making decisions in a different way than we have kind of over my history here because of what's at our fingertips.

Yes, that's fantastic. And then I guess last for me. Obviously, net charge-offs came back to like a more normalized level here this quarter. I'm sure NPLs are still a bit more elevated than you guys would like. With everything going on, all the positives, is there anything that can be done there to migrate some of the credit -- the lingering credit issues maybe down a bit quicker? Or how do you think about the path for nonperformers from here?

This is Jim. Yes, when Lance spoke to client selection move out, it's really shifting more toward those loans that are criticized in this quarter, the $45 million, 75% of that was in the criticized area. And so that really is our focus.

So I'm very pleased with the progress we made on nonperforming for the quarter, and we see some reduction there. We've always had some good news early on this quarter. And that is really our focus to really drive those metrics down, particularly as it relates to nonperforming. So I feel good where we are in the direction of what I'm seeing that we can accomplish in '26.

Our next caller is Gary from D.A. Davidson.

I had a couple of questions. One, just moving over to the fee side for a minute. Just curious about the swap activity in the quarter, obviously down quite a bit. And I think you had kind of flagged that it would be down, but pretty minimal in the quarter. So just wondering if there was anything unusual behind that. I would have thought with the expected and actual rate cuts that it would have been a little more active.

Yes. No, I actually just think it was extraordinary in the third quarter, to be honest with you. I think it kind of came back and normalized a little bit. A little hard to budget for the -- I mean we actually had -- I think our swap and loan fees were up 59% kind of year-over-year. We had a great -- we expect really good volumes around that this year, but maybe not quite to the same level we had last year. So I think it was more about the third quarter being really high.

Okay. And then you had noted securities cash flow is about $150 million. If loan growth comes in a bit stronger, is there room to work the securities portfolio down a bit more and use some of those cash flows to fund loan growth? Or is the base case assumption that it's fully reinvested in the securities portfolio?

Yes. Gary, we have worked very hard over the past 2 to 3 years to work the securities portfolio down to a reasonable portion of the balance sheet. And we define that as kind of the 11% to 12% range, which is where it's at right now. So we anticipate that we will keep the securities portfolio where it is relative to assets. So if loan growth accelerates, then you'd actually see the securities portfolio build accordingly.

So no, there's not -- we don't anticipate that there's any room for a shift out of securities into loans. Now I would note, though, that we do have a lot of liquidity right now. Some of that is seasonal due to public funds seasonality and tax season, et cetera. So there could be some opportunity as we deploy liquidity into the loan portfolio that's not currently in the securities portfolio for some benefit there.

Yes. And then maybe also, we did a really good job of growing core deposits last year, which allowed us the luxury of replacing all of our broker deposits. I think at this point, correct, Wally, we have no broker deposits.

Correct. That's exactly right. We're in a good shape from a liquidity perspective, Drake.

This concludes the Q&A. Handing back to Drake Mills for any final remarks.

Thank you. As we look forward to 2026, we are blessed with many positives. Margin expansion, treasury management revenue growth, fee revenue growth, expense management, pipeline growth, strong loan growth outlook, deposit noninterest-bearing growth. Partners in Argent, 20% has been a big hit for us. Southeast market hit profitability in Q3, which is a big move for us.

Our mortgage group has a positive contribution now. We have strong teams and strong dislocation in our markets. So due to Optimize our geographic footprint, we feel we're positioned to be balanced and disciplined. I think that is critical as we move forward to consistently build ROA while also investing in our long-term growth and shareholder value. We are so focused on how do we manage and create greater shareholder value. It's taking commitment and focus to put Origin in a position of offense. I look forward to a very rewarding 2026.

Thank you for being on the call, and thank you for your support.

This concludes today's call. Thank you, and have a great day.

Good morning, and welcome to the Origin Bancorp, Inc. Third Quarter Earnings Conference Call. My name is Tom, and I'll be your Evercall coordinator. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference call over to Chris Reigelman. Chris, you may proceed.

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 the slide presentation that we will refer 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 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 filed with the SEC yesterday. All comments made during today's call are subject to safe harbor statements in our slide presentation and earnings release.

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 Brolly; and our Chief Credit and Banking Officer, Preston Moore. After the presentation, we'll be happy to address any questions you may have. Drake, the call is yours.

Thanks, Chris, and thanks for being with us this morning. Before we discuss our third quarter performance, I want to share my perspective on Tricolor and the related charge-off.

We had a 20-year relationship with Tricolor. During that time, Origin has grown into a dynamic company that strategically builds relationships and has a strong system of risk mitigation. For Tricolor, our systems and processes included audited financials, various loan covenants, monthly borrowing base certificates and a third-party trust company as collateral custodian.

However, even with the best practices of risk mitigation, losses can occur in the event of a customer fraud. As a leader, it's important to use an event like this as an opportunity to better your organization by diving deep into policies, processes and portfolios to identify lessons learned.

Our decision to charge off the entire Tricolor outstanding debt is extremely conservative. We do anticipate recoveries through a combination of no collections, insurance claims and legal recourse. This isolated event does not define Origin.

When I think of our long history of success, the depth of our management team, the momentum we have generated with Optimize Origin and the unprecedented opportunities within our markets due to M&A-driven disruption, I am passionate and confident we will achieve our ultimate goal of being a top-quartile performer. Now, I'll turn it over to Lance and the team.

Thanks, Drake, and good morning. I'm extremely proud of how we've executed on Optimize Origin and the momentum that has been created throughout our markets. We are ahead of pace on our stated plan and are creating real traction on our goal of being a top quartile ROA performer.

Excluding notable items, our pretax pre-provision ROA increased 48 basis points to 1.63% for the third quarter of 2025 compared to 1.15% in the second quarter of 2024 when we began the planning stages of Optimize Origin.

Over the same period, NIM has expanded 48 basis points. Total revenue, excluding notable items, is up 10% and noninterest expense, excluding notable items, is down 3%. We strongly believe the level of paydowns and payoffs that we've seen through the first 3 quarters of this year masks the high level of production we are experiencing.

We continue to see positive trends in loan production with loan originations up 19.2% year-to-date compared to the same period last year. At a more granular level, business loan production under $2.5 million across our footprint is up 22.9% during that same period.

Through Optimize and through insight into data gleaned from our banker profitability reports, our bankers have heightened their focus on generating ROA lift through relationship expansion. This is highlighted by treasury management fee income increasing 7% year-over-year and loan and swap fees up 62% during the same period.

We've seen a strong build on the deposit side in Q3 as noninterest-bearing deposits were up $158.6 million or 8.6% quarter-over-quarter. While we've come a long way with Optimize Origin, I'm very optimistic about what we can continue to accomplish as we close out the remainder of the year and look towards 2026.

The hires we have made in our DFW markets in addition to our Southeast team reaching profitability gives me great confidence in our ability to drive long-term value in the most dynamic markets in the country. Now, I'll turn it over to Jim.

Thanks, Lance. As Drake mentioned previously, in early September, we became aware of allegation of fraud related to Tricolor. As you are aware, Tricolor filed Chapter 7 bankruptcy last month. As of quarter end, our credit relationship with Tricolor totaled $30.1 million, including $1.5 million in unfunded letters of credit.

We are working with a successor servicer to begin the process of not only servicing the notes, but also working closely with the bankruptcy trustee to identify duplicative and any potential fraudulent notes.

Given fraud allegations and the inability to clearly establish the level of unduplicated notes supporting our loans to Tricolor, we elected to charge off the entirety of the outstanding Tricolor debt totaling $28.4 million and to fully reserve the $1.5 million in unfunded letters of credit. While we do anticipate there will be some level of recovery from the notes pledged, we are unable to determine the magnitude of the suspected fraud with 100% certainty at this time.

We will aggressively pursue all available remedies to protect the bank's interest and maximize recoveries in this matter. As such, net charge-offs for Q3 came in at $31.4 million with $3 million in net charge-offs outside of Tricolor.

On an annualized basis, excluding Tricolor, net charge-offs came in at 0.16% for the quarter. Loans past due 30 to 89 days and still accruing reduced from 0.16% last quarter to 0.10% as of 9/30.

Classified loans increased $10.7 million and as a percentage of total loans increased to 1.84% at quarter end compared to 1.66% as of June 30, while nonperforming assets increased $1.6 million to 1.18% at quarter end compared to 1.14% as of the prior quarter.

For the quarter, our allowance for credit losses increased from 1.29% to 1.35%, net of mortgage warehouse. We did not experience any significant changes in our CECL model assumptions for the quarter, and the increase was primarily driven by increases in the individually evaluated portion of the reserve associated with our nonaccruals.

The level of our reserve at 1.35%, net of mortgage warehouse, compares to a level of 1.31% at year-end 2023. Lastly, as to 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 47% for ADC and 235% for CRE. I'll now turn it over to Wally.

Thanks, Jim, and good morning, everyone. Turning to the financial highlights, in Q3, we reported diluted earnings per share of $0.27. As you can see on Slide 26, the combined financial impact of notable items during the quarter equated to a net expense of $23.3 million, equivalent to $0.59 in EPS pressure.

On a pretax pre-provision basis, we reported $47.8 million. Excluding $7.9 million in net benefits from notable items in Q3 and $15.6 million net pressures in Q2, pretax pre-provision earnings increased to $39.9 million from $37.1 million.

On the balance sheet side, loans decreased 1.9% sequentially and decreased 0.6% when excluding mortgage warehouse. Total deposits increased 2.6% during the quarter and 2.9% excluding brokered.

Importantly, noninterest-bearing deposits grew 8.6% sequentially, improving to 24% of total deposits. Both total and noninterest-bearing deposits also increased on an average basis, up 0.9% and 1.1%, respectively.

As Lance mentioned, we are excited about the momentum we are seeing from our relationship managers across our markets, and we remain optimistic that loan production is accelerating, though paydowns have remained a near-term headwind to reported loan balances.

While we currently are anticipating that loan growth will return in Q4, the continued declines in Q3 lead us to reduce our loan growth guidance from up low single digits to essentially flat for the year.

Given the positive momentum we have seen on the deposit side of the balance sheet and the typically strong seasonal inflows in Q4, we are maintaining our deposit growth guidance of low single digits for the year.

Turning to the income statement, net interest margin expanded 4 basis points during the quarter to 3.65%, in line with our expectations. Driving most of this expansion was increased interest income from our securities portfolio, in large part due to the portfolio optimization trade executed during Q2.

Moving forward, as you can see in our outlook on Slide 4 and due primarily to the expectation of an additional Fed rate cut, we tightened our margin guidance range to 3.65% in Q4 '25 and 3.60% for the full year, plus or minus 3 basis points.

Our modeling now considers 25 basis point rate cuts in each of October and December as opposed to only December in our prior guide. Shifting to noninterest income, we reported $26.1 million in Q3. Excluding $9 million in net benefits from notable items in Q3 and $14.6 million in net pressures in Q2, noninterest income increased to $17.1 million from $16 million in Q2, due in large part to the addition of $1.2 million of equity method investment income from increasing our ownership in Argent Financial to over 20%.

Our noninterest expense was basically flat at $62 million in Q3. Excluding $1 million of notable items in both Q3 and Q2, noninterest expense increased slightly to $61.1 million from $61.0 million in Q2, in line with our expectations.

We are maintaining our guidance for Q4 and lowering our guidance slightly for the full year to down low single digits from flat to down slightly.

Lastly, turning to capital, we note that Q3 tangible book value grew sequentially to $33.95, the 12th consecutive quarter of growth. And the TCE ratio ended the quarter at 10.9%, flat from Q2.

As shown on Slide 25, all of our regulatory capital levels remain above levels considered well capitalized.

As such, we remain confident that we have the capital flexibility to take advantage of any capital deployment opportunities to drive value for our shareholders.

In fact, during the quarter, we repurchased 265,248 shares at an average price of $35.85. Furthermore, we anticipate the full redemption of the remaining $74 million of subordinated debt on our balance sheet on November 1, which will allow us to save $3 million in net annual increased interest expense. With that, I will now turn it back to Drake.

Thanks, Wally. As you have heard throughout this call, we have a great deal of momentum heading into the fourth quarter and next year.

I referenced in my opening remarks about the opportunities, particularly in our Texas markets, associated with disruption from recent M&A. This year alone, there have been 15 bank acquisitions in Texas, with selling banks totaling $37 billion in deposits.

I firmly believe that we have the infrastructure and bankers to win new business and capitalize on this opportunity.

Thank you for being on the call today, and thanks to our employees who remain committed to our strategic vision of optimizing origin. We'll open up for questions.

[Operator Instructions]. Our first question comes from Matt with Stephens.

I want to dig a little bit more on credit. Can you just talk about your NBFI exposure about what this does include and maybe what it does not include? And then secondly, any more -- as you scrub the portfolio, anything you want to disclose as far as exposure to other auto lending or subprime credits that would be of interest?

Matt, it's Jim. I'll start with a little bit of recap color on subprime and then kind of move through some of the questions you asked. Our subprime portfolio at the end of the quarter was about $92 million that represented about 1.2% of total loans.

The breakdown of that would be about 68% would be residential, about 15% RV and about 15% auto. And then kind of moving to your question about subprime auto, reflective, if you kind of do the math on that, it's only 0.2% of our entire portfolio and it consists of 2 relationships, both of which are performing.

And on both of those, as the sole lender in both of those relationships, some of the issues that we are experiencing in Tricolor, the double pledging of collateral, is really not an issue in the situation of these 2 relationships. Moving to the total NBFI portfolio, which is excluding mortgage warehouse, our NBFI exposure is approximately 5% of total loans, 61% of that is real estate related, with 15% related to capital call lines of credit. And the remaining 25% is spread across about 6 different categories.

We've done a deep dive into this entire segment of the portfolio, and these companies have experienced management teams. The underlying loans have good income and cash flow, and our long-term relationships with the bank. And we have no past dues and no performing loans in the entirety of our NBFI segment.

Drake, I heard you mention the Tricolor and the fraud allegations. Can you just walk us through any insurance that could offset some of these charge-offs? And what does that look like compared to the charge-offs that we just saw? And what are some thoughts on time lines around that insurance?

Matt, as I said, we are aggressively pursuing recovery on these loans. We believe in time that we will see some degree of recovery.

But there are -- right now, there's too many variables at present for us to sit here and quantify how much that will be and when that will occur. That's why we took the charge the way we did.

It's at this point, we feel very good that we have these avenues of recovery. And as I've told investors and other relationships I have, I am going to be working diligently to ensure that we have recovery, but it's unclear.

That's why we took the charge away we did. We feel confident that we will have some recovery. It's just in this Chapter 7 and going through bankruptcy and understanding the timing of this is extremely difficult to quantify anything.

Okay. Appreciate that. And then if I could just shift gears over to the loan growth commentary. I think the updated guidance now calls for flat balances in 2025 year-over-year.

If we go back to January earlier this year, I think the guidance was mid- to high single digits, and that was kind of walked down each successive quarter since then.

And Origin is certainly not alone in seeing some of the slower loan growth trends this year, but it does feel more acute at Origin than maybe some of your peers.

So can we just take a step back and remind us about your loan growth views throughout the year and how that evolves? And then would love to hear any kind of preliminary thoughts you may have on loan growth in 2026.

Matt, it's Lance. I'd be glad to go through it. I'm actually really bullish and optimistic about where loan growth is going in Q4 and next year, but we'll kind of step back and understand why I used the word earlier that I feel like our extraordinary origination and production has really been masked by paydowns and payoffs.

So if you think about that, we have actually been averaging the last 4 quarters, $685 million a quarter in paydowns and payoffs, which are extraordinarily high historically for us.

Combination of that is slowing things down purposely to stay under $10 billion has led to a little less than $400 million in reduction of our commercial construction and development portfolio.

So that takes some time to rebuild that back up. So that is -- a big part of our originations for this year is kind of getting back active and aggressive in that space.

And that's one of the reasons we're very bullish on the fundings that will come from that next year. But just to kind of give you a little color, that $685 million per quarter over the last 4 quarters is compared to a little over $500 million, which would be sort of a typical quarter for us. And so part of that is tariffs, part of that is us pushing out credits that Jim has talked about the last few quarters.

But again, I think that has sort of covered up what has been pretty extraordinary on the origination side. Our originations for the first 9 months of this year are up almost 20% compared to the 9 months of the year previously.

Strong pipeline for Q4. I think we're expecting about 2% growth, ex warehouse, for Q4. So if you annualize that kind of at 8% on an annualized basis, I think our guidance for 2026 would continue to be mid- to high single digits.

But we're seeing really positive momentum kind of throughout each of our markets. Texas is starting to come on strong again. Louisiana has been really strong this year.

We've had about 5.5% loan and deposit growth in our Louisiana market. Really like seeing what we're seeing out of Nate and the Southeast team, a good year out of Mississippi. So we are well positioned right now.

And then, I'm sure later we'll talk about Optimize and kind of say how that's translating into NIM expansion and ROA expansion. And so the engine is running really well now, it's just having to kind of get past this unprecedented level of paydowns and payoffs.

Our next question comes from Woody with KBW.

I wanted to start, I think in the opening comments, you mentioned sort of in wake of this event, you'll be evaluating sort of the processes and systems in place to avoid incidents like this in the future. Do you expect there to be any impact to the expense run rate if there's additional investments that need to be made?

At this point, we don't see any additional impact or an impact to expenses. We are going to be utilizing some -- actually a move with one of our executives to come in and create a new group that is internal at this point to really focus on credit management and credit audit process, looking at the components. And as I think about Tricolor and you can sit here and say what lessons were learned.

This is a process that we're undergoing right now, and we've really identified several enhancements that we believe will mitigate risk going forward as we better detect fraud.

As an example, we've conducted a deep dive, as Jim said, and have gone through a comprehensive review of the segment in our portfolio. We're enhancing our processes and controls for monitoring and testing our collateral.

But outside of that, we're expanding the role, as I said of this executive, who will build out a team of internal resources to provide additional oversight and streamlined collateral protection, monitoring and documentation. So I don't see that creating significant or really any additional expense.

Got it. And then -- so you've essentially charged off the full exposure to Tricolor. Is there any indirect exposure to the company like personal loans made to Mr. Chu or any referrals from insiders in the business?

Yes. While we can't necessarily speak to any specific customer information, I feel very strongly that all the exposure in our portfolio has been properly identified and appropriately accounted for.

We do have approximately $500,000 in mortgages with one of the executives, about a 50% LTV and performing. Outside of that, we've disclosed everything, but feel very confident in that we've addressed any type of exposure.

Got it. That's helpful. And then I guess just sort of excluding the impact of Tricolor, just overall thoughts on credit, were there any trends to note in criticized or classified?

Yes, I'm going to let Preston -- Preston and his team have worked diligently through this process to really be able to recap where we are with credit and how we feel. So Preston?

Yes. Clearly, we feel like the Tricolor situation was an isolated and one-off event for Origin Bank. But in terms of the credit trends to get to your question, in my opinion, we saw a normal cycle movement of credits, which in my experience can be lumpy, certainly.

We saw an increase in classified loans, nonperforming loans, charge-offs and past dues in the quarter. The increase in classified loans and nonperforming loans was part of our expected credit migration for the quarter.

With respect to looking at charge-offs, clearly, we had a very elevated charge-off with Tricolor. But if we exclude that, net charge-offs would have been 16 basis points for the quarter, which is very much in line with our past experiences.

And then finally, while total past due loans rose modestly in the quarter, past due 30 to 89 days and still accruing loans declined from 16 basis points last quarter to 10 basis points at the end of the quarter. And I just would say, bottom line, we do not see signs of credit deterioration in our loan portfolio.

[Operator Instructions]. Our next question comes from [ Evan ] with Raymond James.

I know it's been a busy year with Optimize Origin. You've added new benefits to the project each quarter. You're staying under $10 billion at year-end.

But as we look towards 2026, can we expect that the heavy lifting on Optimize Origin is behind us? And is there -- will there be more balance towards balance sheet growth?

Evan, this is Lance. We have a tremendous amount of opportunities still in front of us around Optimize Origin. I think Drake jokingly said we're in the top of the fourth inning when it comes to opportunities. So yes, we've done a lot of heavy lift early.

And you think about the tremendous progress we've made, and we commented on some of this earlier, Optimize was basically crafted in 2Q of '24. And so if you look at that period of time from 2Q '24 to now, as we noted earlier, I mean, ROA is up 48 bps, NIM is up 48 bps.

Revenue is up about 10%, expenses are down about 3%. We've executed on what we said we were going to do with Argent Financial, which is a meaningful lift for us. We've recreated our mortgage business.

We actually had positive contribution income out of our mortgage business this month for the first time in years. Our Southeast market hit profitability last quarter, which is a great trend for us.

We're doing a lot of really cool stuff with data. The use -- and we've talked about this in the past, our banker profitability report since we started Optimize, the ROA of our banker portfolios is up 32 bps on average, and that's really through the identification and understanding of where our revenues are created, where our profits are created.

But then just everything seems to be genuine in a positive way from treasury management to fee revenue.

But for us, Optimize is a continuous process. There's not a stopping point to this for us. So the way that we're continuing to use third-party benchmarking company, we have actually created an internal group that we call performance optimization partners.

They are digging into process improvement, revenue enhancement, expense controls, and the insights that we're getting from that group is setting what's going to be a pretty dynamic strategic planning and budget session for us here in the next 2 weeks.

And so from that, I would expect continual projects that we'll be announcing on Optimize that's really going to continue to transform this company as we evolve this into a top-tier ROA producer.

Great. Great. That's helpful. And then I just had another question on capital. So you mentioned the buybacks this quarter and then I think the redemption of, I think you said $74 million in sub debt in the fourth quarter.

But as we saw most capital ratios tick up, just kind of wondering what your priorities are on capital deployment at this point.

Evan, it's Wally. As far as priorities go, I mean, I think that our #1 priority would be to deploy our capital organically through balance sheet growth. We are very focused on trying to take advantage of any and all disruption in our markets.

And as you know, that disruption has been increasing as of late, we have a successful history of lifting our teams and growing our balance sheet organically. So that would be priority #1. We recognize the level of capital that we have.

We've been in the market the last 2 quarters buying back our own stock, and we will continue to look for opportunities to do that if the stock price remains at levels that we believe are where it's attractive to deploy the capital in the market.

And we are aware of M&A as an opportunity to deploy capital. I don't think that's our focus today, given where our stock is trading, but we would not take that off of the list.

Our next question is a follow-up from Matt with Stephens.

Over the last year, we've talked a lot about this fixed loan repricing dynamic that will support the overall loan yields, and we're definitely seeing the benefits of that over the last few quarters.

As we look at that into 2026 and 2027, how would you characterize the remaining benefits from this dynamic compared to kind of what we've seen more recently?

Matt, it's Wally. So with our with our payoffs and paydowns being elevated, some of that benefit has been pulled forward to this year, which is great for today NIM, but it does take away from a little bit of the tailwind that we have.

That said, though, we still right now, as it stands today, have over $300 million of loans that will have planned payoffs in 2026, those loans are yielding in the mid-4s.

Today, we're putting on loans in the 6.9% to 7% range. So still plenty of opportunity there, and we have over $1 billion of forecasted principal and payoffs coming for the year. So it's still a tailwind, but we have pulled some of that tailwind forward.

If I look at year-over-year, I think our margin is up in the 30 to 35 basis point range. I don't think we'll see that much benefit in 2026. We're putting 4 cuts in our modeling right now and still see 10 to 15 basis points of potential margin expansion from the tailwinds that I just mentioned over the next 5 quarters.

And then just one more point of clarification on the fee income guidance. I think there's some discussion in the deck about -- I see here, kind of a high single-digit -- I'm sorry, low double-digit growth in the fourth quarter.

Can you just -- there are several nonrecurring items and some names that are nonoperating. So I'm a little confused as far as kind of what the base is. Can you -- any way you can clarify the fee income expectations in the near term and kind of the puts and takes around the components of that?

Sure. If you take out the items that are fee income related from the notable items table at the end of the deck, you get to a third quarter base of about $17.1 million. The fourth quarter is a seasonally light quarter in both insurance and mortgage.

So from a sequential basis, that's probably more in the $15.5 million or so million dollars, which is up pretty meaningfully from last year's fourth quarter where the base was about $14 million.

So that's where that growth guidance is coming from year-over-year, fourth quarter over fourth quarter, excluding notable items. The benefits coming from swap fees, which have been very strong this year, we don't see the same level of swap fees in the fourth quarter that we saw in the second and third. But we also have the contribution now from Argent as another positive when you look year-over-year.

[Operator Instructions]. It appears there are currently no further questions. Handing it back to Drake Mills for any final remarks.

Yes. I want to thank everyone for being on the call. And just from a recap of why we feel so positive about moving into '26, it's been extremely rewarding to me personally to see a deep commitment throughout our company from all our employees to deliver on Optimize Origin, which continues to build momentum. The momentum in all of our markets from Texas to the Southeast continue to build, the dislocation in the dynamic Texas market and Southeast market is significant for us.

So as we add that to the acceleration of production, I love what's going on with our strong pipelines. I currently am very positive and optimistic about our opportunity to reach our ultimate goal of being the top-quartile performer. I appreciate your support. Sincerely appreciate you being on the call. I look forward to seeing each of you soon.

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