Key points for investors:
- Tricolor fraud and charge-off: Origin charged off the entire Tricolor exposure — $28.4M in outstanding loans plus $1.5M in unfunded letters of credit — and recorded net charge-offs of $31.4M in Q3. Management expects some recoveries (collections, insurance, legal) but timing and magnitude are uncertain. Excluding Tricolor, annualized net charge-offs were ~0.16% for the quarter and credit metrics showed no broad deterioration.
- Optimize Origin progress: Management reports strong operational improvement since the program began (2Q24) — pretax pre-provision ROA up 48 bps, NIM up 48 bps, total revenue (ex-notables) +10%, noninterest expense (ex-notables) -3%. Loan originations are up 19.2% YTD; business loans < $2.5M up 22.9% YTD. Management views Optimize as ongoing and a driver of further ROA/NIM improvement.
- Loan balances and guidance: Reported loans fell modestly (sequentially -1.9%); management attributes weaker reported balances to elevated paydowns/payoffs (~$685M average per quarter over last 4 quarters). Company lowered 2025 loan growth guidance from low-single-digit growth to essentially flat for the year, but expects loan growth to return in Q4 and is optimistic about mid-to-high single-digit growth for 2026 if current pipelines convert.
- Deposits and margin: Total deposits increased 2.6% sequentially; noninterest-bearing deposits rose $158.6M (+8.6% q/q) and now represent ~24% of total deposits. NIM was 3.65% in Q3 and guidance tightened to ~3.65% in Q4 and ~3.60% for the full year (±3 bps), assuming additional Fed cuts; CFO modeling assumes two 25-bp cuts (Oct and Dec).
- Earnings and notable items: Diluted EPS was $0.27 in Q3. Notable items netted to a $23.3M expense in the quarter, equivalent to ~$0.59 of EPS pressure. Pretax pre-provision income was $47.8M; excluding notable items, pretax pre-provision was $39.9M in Q3 vs. $37.1M in Q2.
- Capital and capital deployment: Tangible book value increased sequentially to $33.95 (12th consecutive quarter of growth); TCE ratio 10.9%. Regulatory capital remains well above well-capitalized levels. Management repurchased ~265K shares in Q3 and expects to redeem the remaining $74M of subordinated debt on Nov 1, reducing interest expense by ~$3M annually. Priority for capital deployment is organic growth, then buybacks, with M&A considered but not the focus today.
- Credit composition: NBFI exposure (ex-warehouse) ~5% of loans, with 61% of that real-estate related. Subprime portfolio ~ $92M (1.2% of loans); subprime auto is ~0.2% of portfolio and performing. Allowance for credit losses increased slightly to 1.35% (net of mortgage warehouse); classified loans modestly increased to 1.84% of loans.
- Management tone: Leadership emphasizes this as an isolated fraud event, is conservative in reserves/charge-offs, expects recoveries, and remains optimistic about the franchise trajectory driven by Optimize Origin and market disruption (notably in Texas).
Sign In
Buy OBK
