Bank OZK (OZK) 23 Jul 212021 Q2 Earnings call transcript

Company Profile

Participants

Timothy Hicks	Chief Credit and Administrative Officer
George Gleason	Chairman and Chief Executive Officer
Gregory McKinney	Chief Financial Officer
Brannon Hamblen	President and Chief Operating Officer
Cynthia Wolfe	Chief Banking Officer
Kenneth Zerbe	Morgan Stanley
Timur Braziler	Wells Fargo Securities, LLC
Brock Vandervliet	UBS Investment Bank
Catherine Mealor	Keefe, Bruyette, & Woods, Inc.
Michael Rose	Raymond James & Associates, Inc.
Matthew Olney	Stephens Inc.
Brian Martin	Janney Montgomery Scott LLC
Stephen Scouten	Piper Sandler & Co.

Call transcript

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Operator

Thank you for standing by, and welcome to the Bank OZK's Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host, Tim Hicks. ahead. go Please

Timothy Hicks

today's am for I call Chief and expectations, session. Credit morning forward-looking may Good about statements OZK. Tim Thank Officer our In question-and-answer our Bank participating and our session, you Administrative we results and make outlook morning. filings vary estimates in Hicks, risks Q&A for refer this on the information those Please future. release, that the or such more cause our earnings implied to management forward-looking factors for and or comments projected in for statements. to and from may actual joining other outcomes public by various

Banking Joining questions time Chairman To ask efficient most call and to this any we McKinney, limit make the me reenter Hamblen, use the Brannon for your Chief you President; Greg queue on please needed. and time questions then follow-up Officer. Gleason, to if have CEO; or the Officer; and Chief call, the are one George Financial for that take of we'd Wolfe, questions two a at your Cindy

for will questions. up open the your now lines We

Let questions. me operator ask listeners queue in remind how our to our for to

Operator

first the Ken of line Stanley. comes Instructions] Zerbe ahead. question Please of go [Operator Morgan Our from

Kenneth Zerbe

Thank Good right. All you. morning.

George Gleason

morning, Good Ken.

Kenneth Zerbe

end a we a to in been grow seeing off, turnaround to quarter? I payoffs actually such again slow could talked comments prepared be a several written fourth in starting those way? about last are in big quarter. Hopefully, remarks, just start that years. George, could starting mean, your start the say fourth can know you RESG to that that headwind suggest in total thing the sort designed in or Is have payoffs I potentially of over loan to the I really growth

George Gleason

don't think interpretation. I proper that's a Ken, no,

spent the interpretation of major six looking majority a hope the volumes think payoffs I quarter the of I there. of road the almost meaningful increase and beginning at weeks all origination to second in and our members and to scores think in visiting projects. will out be our during interactions meetings continue origination had And to vast team way. is customer RESG more markets We high. think I on about

we're from our to will getting year. naturally are that volumes that that would offset ability about would pretty year, we So higher because the we naturally optimistic plus pandemic origination begin elevated experiencing this achieve last repayments COVID to for have the delays now occurred that but occurred are repayments have repayments

part where be originate are we loans and to think construction a going business. repayments development I common of the

obviously, we've of got continue leasing, refinancing COVID-related and just originate to all offset to year Now, payoff. because that accumulated development last normal of we're the of a going in level that project completion, construction construction than in to have our the this But more delays fact to sales, prepayments year. higher both loans

focused So We've a franchise. great we're growth. got on

itself pandemic. franchise through recession, now through itself great proven the has the proven Our

a take there than for I of coming quarter the of on more grow them. be to XXXX, on certainly to spent Our rely last our we've see in weeks I business six this team RESG lot because we've origination certainly some all we're to chance there. there And that is of to taken our that increasing hopefully going it we'll us of going did over team business go can work the we in going help that I in to during XXXX seem volume level year, the think they produce us sort and business customers networking an with begin of really the next the road significant QX. our origination and that opportunities And always on filter XXXX, of out know late through think be suggest count to a I and Brannon's to And years. that the got several a the on the can road and course, quarters, past that do same with next our

Kenneth Zerbe

Got it.

Okay. That's question. perfect. my just And then – one one follow-up

it Or you but the think Thank here, we unusually it higher? terms lower interest some we very a of you. the driven NIM go-forward trajectory In drive by basis should have et increase continue net a – say, there. the of high about a expect interest should to obviously, think good When collections, we the may also lower margin, you we costs about on to deposit had from been the margin? had cetera, how that NIM And costs. minimum deposit seems of

George Gleason

environment and last lower of I very would on financial probably low-rate we're ourselves which originating of earned in should on is than management loans peak part that at at in the but near probably We be, suggest of loans lower the or were quarter. than a liquid yields near-term. NIM That they they loans comments the and in our find we're that rates sorts lower were the that unfortunately this on commented environment. are than all instruments we part it's rates

with we're off, to able So as replace yields. yields loans equal roll not those

hallmark that more But diligent and a being get time we've only adhered to price structure not to long to assets replace grow great our are our rolling for aggressive but off, we not the are on that standards asset to heading are standards of are assets. credit sacrifice also We that quality.

here. important. growth negotiable is So Pricing bit is a in

some headed room this in to continue got detail. costs room We've on certainly about reports we to didn't that. are got I quantify of later And deposit to be the is our benefit pressure and in yields ended lower for of quantify noted normal. quarter research to some on reason loan NIM. know noted a I've a extent. from it's our good talk there'll we spread while the level that and that We've minimum lower. on loan – did can just So pressure and core almost think And very We Cindy the hard probably interest what's results fees, several didn't some

quarters $X $XX and just high-end We or quarters bounces all the the million it to million it's were Some around on range. some that's place. of million, $X or over million $X

quarter, loans just quarter could hard at things be when to are This lot the the this high-end of of we on on the few quarter and for low It or range a know it's forth. and that middle to particular payoff so the quarters. next of next depends

we of So high-end on we were the that. quantify that didn't

the yields our ability be naturally continue going guys And in will with So to doing some to key have alone is cost on that pressure that a deposit pressure [indiscernible]. to the offset are really and loan QX. reducing

Kenneth Zerbe

much. you Thank Perfect. right. All very

George Gleason

growth Ken, the Long-term, is key.

Kenneth Zerbe

Thanks. All right. Understood.

Operator

Thank you.

comes next Our Timur Braziler question of Fargo. Wells from

Your question, please.

Timur Braziler

good like the look And growth Hi, growth all long-term of is ABL, is starting RESG payoffs rate RESG, rate George, does our near-term comment once like in what morning. maybe with converge up that kind probably XXXX? what then growth CBSG stabilizing key, look that does again, following it Indirect guess like? seems normalized XXXX. in originations just to on your pick and the up last RV/Marine, I

George Gleason

Hamblen President, and oversees Brannon Specialties our let but address and & Business RESG Corporate is Lending our that he I'll new Group think, I because Group. Timur, Brannon our Asset-Based

perspective on that. good most pretty a got firsthand he's So of

want to take you that? Brannon, So

Brannon Hamblen

very there good is and very there little what is growth would and question, the strong for to fine this, make. morning. bit perspective, We're a pick up. tell from seeing Picking I is George pipeline alluded point activity. out Thanks wins a of good you to available RESG's to conversion, rate our normalized But our what's Absolutely. starting and we're

the and the direction beyond So I'm be what back back toward the half in year to for we've expecting historically RESG moving definitely and of in right originations done.

it's to while you've portfolio XX% close construction know, what and a get guys out. a dollars today you cost, You those loan it got average to loan when takes

we – legacy will and of included left the that's we've sense again of have the Page the while left what's really you from X what's to portfolio graph that paydown. therefore on a gives comments outstanding So

you question, of to like. real get is that cycle a So sense Ken's back what to look earlier going

So and start that on have hands growth sitting still our XXXX. on seeing payoffs, we good origination but – weren't and will I'm will obviously side XXXX really some we've in to opportunities the

of is going and as with XXXX leads the lending that one help some loan, good possibly opportunities growth. first I Sheff, hit some and growing. we – expect is We're I will in happen will probably, early payoffs those steam team I a keep probably going these is, And the part and covering, again, infrastructure those its in who they're pace, back coming the that really us is in those feeling but excited, will the in there. last having, In Georgia closings very addition group, group, least X they're They'll new at incrementally start loans there QX really in our velocity in asset-based forward building Page to first funding half the mentioned I'm well. or in addition first and that at our But starting is QX. And to look market think, in originating that the that Texas the contributing originate of think toward see start to in toward out to the that end gather or the about adding on we of as the that to team the what well seeing QX, So natural markets geography pretty get good guys team active lifecycle. originations you to and players keep offset quarter Mike or XXXX. that solid guys moderate the to about and think following

to stuff headwinds world. on, and I potential credits CBSG we as getting originating and new building they're a some competitive base for some solid but that with in really good group new noted, our And have originating going some think there is, there. is borrowers early

see we'll that accelerate So well. as

but those We're to to having now. that we've previous back some we're years good to all think and the is the looking the So is positive RESG I outlook to circle groups. I in, of success trying And across you driver and number, it's there there. hard in Timur, there forward it think tell that there. can haul We big getting a out is three what volume seen

Timur Braziler

Okay. Helpful. Thank you.

George Gleason

are while year almost new spreads. performing. our a rolled and asset premiums able Timur, protect going ago year a that add unit, to traction with we better we lower think, gaining, business consistent lending or out that's our now quality be a way group and We're to, manner, really and like model the paying steady very indirect in there ago in we would we that and I that about the getting

but spreads, how our better might better Now get I think. now, low just is. some not everything translate right that also because into getting given is are, bank of where rates we may rates traction, And community

a hope progression origination between from getting things earning and So before. got in higher certainly in the And funding is to growth right through challenge good certainly time throughout units up I also, ought and more the I have proven. ever really a to we'll model will think we've across our been I it's said, diversified business of into QX. And that a loan think a number outstanding prospects outstanding QX, XXXX on Brannon to lead assets in think we than these I of I to has company, future. positive side be level direction. stepping as beginning them. we've going growth the got The see And been the volume get steady in all there balances think these total closed continue But a and

Timur Braziler

online that Okay. or seeing Is still markets are are your few other deals I coming a my you New standards? number in online? aren't that credit And of appreciate as see fewer you some that the are origination your that deals in box color. starting indicated to that Or such large standards. York come the checking meeting you're release opportunities necessarily follow-up, then had urban

George Gleason

we're Boston, lot fit a hold sense, in lot was those in put lot origination you, that But I our I tell those I are in of in was see lot that projects in coming Los San always the market significantly to was phenomenon. of on of the now, I are urban And York, I in I really would was lot last New a and was on bills good, make were was several Chicago, Well, a more markets our by just a in those. working seeing major we credit in the portfolio I missed don't box. that was markets, impacted a got Denver. in pandemic, Miami, this the of those mixed-use been was that there Francisco, good Pete of markets the in last for I a our I quarters, of shutdowns area, in a Tampa-St. that Angeles, because we've I've quarter. larger in pandemic Phoenix, lot look back opportunities COVID begin the And quite and those few we're of emerge opportunities other projects to that more work-from-home a

So think well bodes that future are volume. things I normalizing and origination for

Timur Braziler

the for you questions. Thank

Operator

you. Thank

Our of Vandervliet UBS. Brock next comes question from

Your line is open.

Brock Vandervliet

everyone. Hey. Good morning,

costs. as declining top be and deposits what of Just costs that to a quarters out great the more in, deposit a think something with your really tangible time what talked And motion remix, granularly, on couple say you by seems the funding now see where both you in Could basically to settle in interest you've for dynamics, of cost categories, about inning George, it's are total deposit talk, process? we year-end? house, lower result, could you in or a

George Gleason

where due Ottie tell to our in what and inning where they so under good of you she includes question. Retail Chief phone, try going to of that. in, Deposit other Officer built a our Cindy Cindy on a is advice our I'm going on key to that doing I'm on credit Cindy And Carmen Kerley Brock, Chief team let Officer, going McClennon, process really great to give give thinks but you the want not we're base. that just Chief a has and players. to are Banking are our I Wolfe, answer we color job. Cindy transforming Banking number our Officer deposit But her is credit,

if one that take Cindy, would. So you

Cynthia Wolfe

left be funds we maturities. as CD have Yes. guess will of what I see And in year-end. won't at run further, can Sure. our But you cost rate XX, Page on our

the course, lower. I that's can when expected this those to a historical about repriced performance industry. actually our we we went retention this continue. trends than they're on talk based – we that we're wave been retain maturities, being of it them there happy of that, around and going And and certain which about CD go all retained So indications how around we that, and of that's amount CDs far so of are obviously, will and into we thought more much would, And

So to that you XX, can Figure of see cost in core. lowering replacing our changing in advantage not take and continue funds, mix and only so that, with but of deposits we'll of

Brock Vandervliet

stack or in And here of it. a the of taking as an noted selling Is a the there, out closing some ranking behind in just follow-up, process branches? comments on What's profitability of headcount. going kind various Got branch of sort two that I – the kind that scenes? interest the and

Cynthia Wolfe

We say always run a way client-centric than the Well, that We of be number will our to it's is want look of But we've different branch a client-driven. it a factors. no bank. I different at really lot network planning.

prefer consumer So our over whether we the where device, it's in phone, online, channels various have over and to a of with interact all branches. course mobile these clients us,

them as them clients want as branches our to have busy, that and So want they keeping are then option. we long our

network. branch our with market the to responding really we're So

Brock Vandervliet

Got it.

for Thanks Okay. the color.

George Gleason

of things feel, of plans. pandemic, and banking more by the color look, branches. on the well. Cindy or the are add the drawing mobile apps. really We some with a metrics board. much reliability and to and meant technology Brock, worked well. aggressive has that or interacting that But were those those with speed and of branches team They of out customers as I were rapid customers our a customers pandemic, and interacting had to our would way encouraged couple to responded All channels in be times updated the which that improve adopters have performance how functionality who there been our adopters aggressively drive-in-only The whatever, different with a and those little that technology, pushed faster as of improve apps slow dynamics might team closely these COVID our appointment-only changed accelerated mobile

and of and customer So area, serve branches in mobile customers utilization utilization. patterns increased has instead reliance of technology customer an some in increased branches could an on of We non-face-to-face closure changing these that situations that branches accelerated or we online concluded or interaction based of with effectively these where technologies most two two utilization area. our we two had changing and three of instead one of and other the and three are branches,

is in it in offset plans saves seen expense our so the fairly we're cost working and be have important going behaviors cost and the now very to lot growth. because their helping people where they per patterns the or you've environment experience and had following to non-interest an a pandemic. Those that during pandemic So year and are muted of changed

effort experiencing as important ratio. So that management to these labor longer and cost needed we're are comments critically improve be even branches going no mentioned inefficient efficiency our best-in-class in structure and maintain in our cost our we to closing or in eliminating other are the redundant

Brock Vandervliet

George. you for Thank the color, Great.

George Gleason

you. Thank

Operator

Thank you.

ahead. Our Catherine question of Please Mealor next from comes KBW. go

Catherine Mealor

morning. Good Thanks.

George Gleason

morning, Catherine. Good

Catherine Mealor

was I authorization. see to excited buyback the

and to whole how opportunistic, Just go wanted more sense to or initially intend million? and the it $XXX ahead to active use your is be that get you as is plan to

George Gleason

to want do Tim, take you that one?

Timothy Hicks

from to good Yes, morning. hear Catherine, you. happy to. Good

Catherine Mealor

morning. Good

Timothy Hicks

it has that Obviously, the share for we've It July our this in so that is is repurchase done year. go through question. of history. a Yes. next one-year authorization authorization first does our Thanks expiration, an company's

opportunistic. were Obviously, moderate we we I When probably stock be I mean, will goes we going less go up, down, active. to to our active. stock a if there. price be more have we're will our price pace think be

So at to a for moderate pace. I think be opportunistic opportunities we'll look

Catherine Mealor

the industry then the question. like Tim. my outlook. more I was an win sneaky, of just just is This And there, on growth other question that is kind

of impacting outlook? think how how about the that that your of how costs projects. the half much along And to moves hearing impacts what's move year, Just as keep construction and supply and – sense today? How new to about construction is kind are growth of impacting we that through issues your chain we kind of that back as originations

George Gleason

address like Brannon, would you to that?

Brannon Hamblen

question, for thanks the Catherine. and Absolutely,

I decreasingly short way the answer is think so to that.

As situations XX-year we the some to moved there outside of through the on year thus been had originations, dealing with we're what week-out and our have quarter, to have history year, opportunities but really the this travels as over projects. to construction in impacts, George you there market. where used seen are realm affecting come nothing alluded past far increasingly And as his of in week-in, to

So cost moderating lowered But is be the of impact closing as right it impact bit. itself the that it though may in certain yield so market a really liquidity there to impact, some to helping projects. stacks and projects of capital tooth the say in doesn't cases. perspective, that that as cost impact And the or there data cost present that's the and a of the there. is after closing to, is pencil would feel the there There pure a those money a absorb loan expectations any some fine seems material is that that to and delay any alluded from on we've

bringing that To deals not So extent or as the deals the we came issue, through an is been are type that it's much in from move the it's RESG number deals and earlier. short, market year that up increasing of so. keeping deal better moving flow

looking we're mixed those at projects that the think larger slow I of been more have use COVID. out out of definitely of box

loan to can as And on start would then the happen, and – into our are amounts a this of and we'll anything market, expect my those back large out close so to us There able XXXX. to mean the into yet there of I would on we to I in average be projects course, year a capital bid lot expectation half of projects. to great puts be see larger position but large come

answers that your So question. hopefully

Catherine Mealor

on That's the maybe does. know RESG book? could And on one today It maybe – this I in up give or fees accelerated where follow maybe anecdotes you is the then on Yes. I could, it's great. just sense about the new But loan to production pinpoint conversation. us quarter. particularly if hard yield follow-up, a coming to

Brannon Hamblen

It's story. of the Absolutely. sort same

lot the types as have really on, but terms product or residential, multifamily good going across other In a origination the type, we whether been of of condo, continue well. product there's to diversification

Southwest, There a very is Our the the footprint lot West. trends of on New a question well situated enjoy but York. benefit in migration to earlier geographically was particular of Southeast, also

are, haven't that we pick we'll there. business think there, the looking up origination yet back I opportunities we're While seen and definitely more the at doing be

While the a the market. of great job the done good guys that's activity there, been Boston penetrating slow, market, DC have

ways that dice we're And quarter. is a So in have future comments. pipeline of what our said the different in lot we portfolio that not from our you in this for is, all we slice comments what our origination we seeing and

coming of the stuff other in meantime, of we've markets, and markets. the done closing the While In the some some to they're been big big in market. smaller we lot the of haven't ones a

in So that busy, last loans in, lot different and closing been product markets couple same of keeping the the we've a lot active across of a quarters. types of general

Catherine Mealor

And on this pricing Great. then loans? new

George Gleason

helpful, life one. let over one. powder that let tends RESG and take diversify industrial be think a into that all because diversification we me trying things more at done get that margin that the lower portfolio Catherine, to Yes, further of is to We're Board. It's sciences that that pricing. me take

Board. is over really it all So the

the transaction, lowest that not of than compete market, had committee we've loans to of variety transactions the on and so, And to we the last We more that approved differential execute. the pricing complexity approved XXX basis weeks just any deals. between that we six get for. are expertise the lender apartment product vanilla that reflects transactions type, complex require a We or the start really deal think those the do the pretty sophistication commodity-type probably much highest things. probably yields as in our doing better in had can it I plain a a point get and

a So it's hard And the to getting would book. the you, down for the surprising on there that anybody, nail tell been I we're the Fed there's not new the yields on to got are they've under rock than last than pricing. just couple of has is yield loan liquid average, years there so was. the that yields originations less out because the on market

yields, as we loan said, low. and that efficiency keeping with our controlling got cost volume, with we've to So, on to really downward offset a offset ratio deposit got we've clearly, that pressure

successful like So we our an of that. to and our environment our prospects I plan I understand plan being And is how address loan game like pricing. on pressure where with there on

Catherine Mealor

it. Got Understood. for color. all Thanks the

George Gleason

Thank you.

Operator

you. Thank

of Stephen from comes Please go Piper question Sandler. next Our Scouten ahead.

George Gleason

Good morning, you might be Stephen. on mute. Stephen,

We to question. the will go next

Operator

Michael of James. Our next the from line Raymond question of comes Rose

Your line open. is

Michael Rose

higher into everyone. a big over morning, that that. issue. technology. moving industry. the new for years been But to know spent headquarters, hit questions. money systems is like It's good a investments, of yet, Hey, things lot my the you for Thanks area One move the guys have George, on I plan hasn't continues tax becoming taking

expect that really those fund would control on, get ago. investments have working you them? Just to how front expense the maybe some you're and maybe update an some a to been couple wanted You on on years good of larger of after things guys

broad we to the just update a and Thanks. where stand. efforts technology So on get wanted

George Gleason

to innovation couple take data now to technology for Hey, has Brannon do and a Obviously, been you and reports quarters. want Brannon, that? of

that? So want to Brannon, you talk about

Brannon Hamblen

well. – side Absolutely. that, facing the talked of the outward way the to of And And about a last quarter we alluded run around have we say been efforts operation. lot this and efficiency the Cindy as George I think the I'll

to war. focused internally do two-front of So better it's a on everything we that's our what preparation focused be and that efficiency It's today and faster. bigger, tomorrow, want on and is we

developed make Moody's is working at we're organization initiatives and bringing the at on other, same rest what's just data one end was be RESG the into that process. platform the give – in that give efficient working delivery from together more better opportunity that the time to process going of application upper into initially So to end focused beginning management from to the on and of of on us some bringing the insight the and the on of both to

data then and So new a is lot just – and managing of data there our and new marts platforms.

as So market. is a then efficiency And alluded team, our Cindy a to with with side. George fronts, the have as working internal to the big Labs relates it Carmen word and of been on move number to

at edge to technology the in team where the needs best Cindy desires to to are her of ensure the in go. and position change, we stay that it As world that to deposit move leading want needs the putting possible we and

the that provide our way and times the and we're we customers but opportunity our their both not to in So we have said to many efficiency just with also credit, do serve our jobs. employees committed excellence

be we're something will that always on. focused So

I the think stay everyone of desire on with speed changing times. up and our ahead all at to understands the which that call and at is it's technology

Michael Rose

maybe… Well, Great. Okay.

George Gleason

quick to little been bit Brannon. last reports up Hicks, really And and data delivering that. technology upgrades a technology an we've and team. are now solutions. to year said enhancements, Malcolm innovation in directly add excellent to effective reports who me to have We whole in And the very technology, that group Brannon Let fortunate as

are them makes our think, advance Those improvements company, Our of very helping I Labs sort that. unit ever practical, to that We've they've instrumental we accomplish effective gotten really work a focus and fronts. a in in continue guys, has done, things that been get very group the doing throughout best pragmatic, of done. on lot

pleased are. I'm So where we with

probably huge to going expenditure. think in your were increases we was aimed at I see – question

feel our at at about a we're advancing but pragmatic I materially. same how growth fairly I cost But very because capabilities think efficient pretty to think we're me. increasing the that I approaching I very good they're progress our making regarding spend, think So incurring we are this. in real very being make time consistently that to technology and moderate technology, are rate seems efficient of and will guys and we the the progress see

Michael Rose

– but Okay. that's Great. you NSF service the I also just fees. follow-up, is out quarter, guys, then, do for And to that a what steps it there, plan again? as the self-imposed, for big has external the you on not line it in been know up drove maybe this quick for charges news there's some headlines what to it it's those small NSF some customers Thanks. but relates lately. but And a proportion been take were this some pressure as a b) know I a) what you, increase? have

George Gleason

significant Well, short wind are It have we're or change some likely that what about run, don't monitoring are anything does in going conversations in changes any and on regard. increase plans the the regulatory in that We to political that ahead. subject. seem decrease

to interest Cindy customers as more And And core customers. out – and that approach so we in and create activity. seen, taking have more less forth, last are just or more that getting team engage and are service revenue. on service deposits people core economies driven reopened seen improvement particularly philosophical tend two charge charge activities of spending in an have customers, the fully We have rate that the and those is part and month her

just activity the reopening. you, impact So in was the the biggest I in normalization the last economic would tell of improvement and quarter

her making in quality of and Cindy profitability is base. Second our to deposit and are and improvement value that team that the

Michael Rose

taking my Great. Thanks questions. for

George Gleason

you. Thank

Operator

Thank you.

Matt of Our Olney from comes next question Inc. Stephens

open. is line Your

Matthew Olney

Thank with you. costs. higher I'll rates deposit I sounds bring funding locking guess future? bank strategic if is interest-bearing start the on like there of longer-term liquidity anticipation the considering in in room down yet It the in near-term. the that just But all the a in from the in I'm curious system, more is to standpoint

George Gleason

to want that? you Cindy, take

Cynthia Wolfe

you the question, Would repeat please?

Matthew Olney

longer-term in interest in of funding bank just the was higher is I Yes, if rates. anticipation Cindy. locking considering asking

Cynthia Wolfe

are. We

been are having Director Ottie steps duration our to So making Harper, overboard Officer; we We're our conservative conversations and yes, our duration. Deposit doing not but that are and of increase some and going Wholesale have add book. relatively with on Managing – some those it, moves in Chief working to Deposits Drew

Matthew Olney

Thanks for that Cindy. Okay.

George Gleason

that And in manner. Matt, we're doing a effective cost

point. pointed deposits. renewed deposit QX, I cost, were on X It Figure think, in if Cindy new at out you up our the there of materially chart fund at in think this bottom XX duration was. longer to of actually – to And And instead some basis in they page without basis of cost of reflected QX point it their impacting time and really I X down were higher quarter. that our fraction that than fraction a look deposits They a the rounded ladder efforts QX. in differential began

Matthew Olney

that the quarters. of fees and delayed just back it's not as be compared for it were should around that's will are Okay. to that And guess projects elevated schedule? year that comments. some then And where RESG you last a I does mentioned said, of given particular, And extension George, fees. project can in the any back then was online extension with feel discussion the fees been Thank want for that quarter. one consecutive were I to short-term some circle to getting you. And that My been fees extension year. those land so, that predict next Is pandemic not But fees I Thanks. that fair? Is we assume delays going easy assume loan these are year? to fees management few this like associated the think by have the in so was right? if that those And has driven normal working that lower assumption of coming to we those on back

George Gleason

low interest Matt. and in But a That's $X quarter again, probably And million does in quarter, just a million around or million of a extension minimum extraordinary a lot. million somewhere so these talking typically $X kind bounce we're I fair a mean $X it and or more quarter $X a assumption, high and fees, between range forth, there.

of two months been that two four last the Particularly we'll COVID to six loan are faster tend correct of delayed interest earn-out has than diminishing interest of last need that typically quarters. off the in minimum because to actually, your that the fee to deferred couple paid other think market for deferred income. impact before that and loan tend when origination are six to year I last closed Those level lot off even just of see and pay earn-out going of the than some months months the the fees minimum that loan three acceleration times. And in fees a a going of much things expected from and to the project projects bit and a were and projects the to acceleration And And a quarters have things times going periods bad can nice things months bounce around greater faster good of source months seen fees sold continue normal year. interest quite refinance quarters, and next or you're minimum or payoffs. we've and yes, and those permanent in short-term somewhat units to lot and in sales slow. tend fees they by and tend to the to or where three of extension another So get – refinances origination a are times fees when just slow completed

earned a situation we give on around really dynamic just it's to pressed are a it it them because quarter-to-quarter. hard very hard We're bounces guidance And So good that's to we though. thankful lot and for it's generalize. why them, from always

on clear be me Let that.

Matthew Olney

color. for Thanks Sure. the

George Gleason

right. Thank All you.

Operator

Martin go Instructions] question ahead. [Operator Please next Janney you. from Montgomery. Thank comes Our of Brian

Brian Martin

Hey. Good morning, everyone.

George Gleason

Good morning, Brian.

Brian Martin

Hey, George just Tim. maybe it's or whomever, more just

just on deployment Just capital. obviously, I of mentioned. growth talked of in you've the mean, the kind the you've the – buyback about

the you're you opportunities what of the update front articulated? that's or how Just trending incorporating you've today it's on that the any likely commentary, with in kind just M&A just how you're growth of seeing already maybe in less seems

George Gleason

Tim, to you talk about want that?

Timothy Hicks

comments, team. Thanks, number lending management banking there of we've positive organic our as for got growth growth happy question. a we lot things way one the Clearly, to. is in the outlined asset-based in a moving community team, between our Yes, Certainly, RESG, priority. Brian

actually exclude you quarter. community PPP team If the grew this our loans, banking

think banking. I community no well markets surprise seems in a trend be our Florida to as lending well. Indirect on did certainly and there positive Texas really

along earnings and very repurchase our our well. appetite growth organic we So as heavily we're with for a But announced Obviously, focused opportunities there. back share authorization the M&A. on is

of We that we organically, are that opportunities. Obviously, do don't believe and where of some to It the cash to compared or to valuations disrupt have to compared acquisitions opportunity. active some is it want can of would occurred undervalued do be is at growth of of of a market the looking the We we our something for to cash. that right anything have we looking Clearly, very some peers size is stock would opportunity for momentum and of size still and now. some the are actively that probably a looking the growth recently. we combination do look M&A secondary We us a stock organic but our price for would opportunities.

the of lot and primary of interest at a that. all is looking we our focus but things do there, is to we're just one deploy our of shareholders our moving avenues how areas So do – a best that capital in

Brian Martin

Got it.

about how balance XX the should a mix XX% that think months? I how of may Tim. then think helpful. assets. that were given we in mix kind the just if relative of of the I Thanks, just change had maybe Maybe to of the growth That's sheet? you, right, bit exactly as past. that's so that? securities about you bit a front securities know maybe I not of little were – up to go just do just but you think I'm but Okay. the over or up the the quarter, How this up next XX And months to sure little kind

George Gleason

of Brian, XX% liquidity and XX% things secondary source our ratio comfortable. We've say, and all have We've range. sorts we've in that other testing to I of stress typically would maintained given loan-to-deposit that got us been a being think that we in loan XX% would below we comfort that growth XX% back where little into as I We're get we'll the want, the future. right return range going to at that level. now. that

Brian Martin

you just in? earlier, – on just Just inflation. George, wage I one sneak said commentary Greg, about Can one for last Perfect. maybe some like Okay. look the it the

we Thanks. may Or here? impact that? as that think expenses go how just we should Just how about forward

George Gleason

shot Greg, do take at a you to that? want

Gregory McKinney

you the for Brian, Yes, I thank will. question.

management all U.S. that find and we we the want able our the retain being in are really broad-based getting sure we to spots fill where bank from pressure As the teams to pressure, across and compensated. mentioned here workers comments, our wages properly have in make have experienced teams to and our

trying to in increasing couple to a we of any But to comments, determined. extent But operations can question pressure things eliminating and cost going us we into sure all inefficiencies, going going benefit next that utilizing to some sort we long of our of really things we that. of a mentioned a look are still effectively quarters. probably and How of at we're us to that challenge redundancies help quarter be those technology probably our sure Cindy make to about some as in to we and branches, offset That's to I there offset continues? that wage that's response as comments her two. look those over our prepared can for salary we make of driver certainly and is Hopefully, or the the the pressures. be be So that from that's or think the be next

Brian Martin

Okay.

Timothy Hicks

expect have a issuance costs on deferred incur $XXX,XXX about one-time expense to of have going closure for items Hey, Brian, from well. non-interest million of And –that QX had and it that that QX of to going that's impact our for couple the X, few to we going is do and redeem specifically, not just to a non-interest close as QX, reminder schedule were then $X we in, amortized as But charges to a this are The sub-debt costs in we are Tim. we yet, July in that come branches did our expense. commentary. we have in type QX of that

a perspective, QX reminder, but that will from that impact So quarters. just future not and

Brian Martin

Got it.

Okay. taking Thanks questions the for guys.

Operator

you. Thank

Sandler. question of Stephen from Piper Our Scouten comes next

line open. Your is

Stephen Scouten

Yes. appreciate Thank I you much. it. Good morning. very

George Gleason

Good morning.

Stephen Scouten

of on that's wanted lending maybe legal the cash predominantly you're I find in And light I capital how to cash. deployment it, deal is of know limit. capital the of or a buyback your just part to about follow-up So kind just to think of and kind able a

theoretically you return $XXX legal lending we is bigger into the so commitments, see And that? million, not as much $XXX soon? and your don't million, need anytime right limit Or too reading high I might there be to $XXX that inference the million am

George Gleason

reading much that. You're too into

other legal portfolios lot Our longer capital accumulating significantly increase a very recent loan a of RESG grown by years, which term. to is now, of we've strategy important in limit and our our part

to repurchase and is even for stock that dividends let and our our the expect pay dividend increased capital us situation or So I level of I capital. the going think program stock not rate down. through strong our what maintain the aggregate increase a you're repurchase would of our seeing and aggregate dollars to take that's earnings

of less Now, July or more Tim mentioned that and redeemed mentioned million sub-debt, on that X. our comments, management we our $XXX

complex seeing large we somewhat our July has as his universe we number on to We expect But up. on whenever top And we less in replace a on that best-in-class limit that depending projects we that significantly we but will of projects. sponsorship market sub-debt, from Brannon phenomenal that mid-quarter sub-debt reduced are in away go conditions really of sub-debt the to have be think part comments, of market temporarily X the more, that mentioned where back a back the back that cost. bucket mixed-use will best-in-class place that probably capital replace to somewhat with gone refilling come legal at

increase stock So and not see more history I those think with transactions loan doing you're to And I on that legal earnings. even limit, the to going continue dividend based the we've will forward going of less. grow buyback strong hope and our us had,

Stephen Scouten

and question then up, And guess my related. is of extremely like paired if Figure commitments have of and with some at looks that That's looks Thanks, I levels headwind look Okay. been strong funding those should XXXX that larger the kind remained I've X, the it follow-up And in Figure origination it XXXX of prepayments normalize helpful. George. look like at I where have production. XX, somewhat then you as

with we X% could the to really like prepayments is don't like seems growth aggressive? So return saw about and the X to XXXX too level slowdown I'm but that they in if everything direction. right trying the shouldn't how moving precipitously. reconcile But I'm or Figure strongly it trying is really in to said then that think about more know necessarily, I you think

George Gleason

Yes.

strong everything think really I direction. the right in moving is

sort deals of years years typically, are our of course, most the two to average. on three-year books, Of four

carryover some XXXX. from and got still we've XXXX, XXXX So

most so XXXX All of is Several of paid quarter, XXXX everything a have pre-XXXX originations handful off. just of off in more those paid paid and to recent almost and the now pre-XXXX we're down up all we're wrapped stuff into is XXXX several going stuff to to pay some sizable XXXX origination the volume is seeing paydowns. XXXX that over and where deals. and off start quarters The next XXXX, getting the point the

of that, on of we'll be the moving time three-year and year, mark out. kind to Next hitting deals be prime kind for the that's

to to business in variety elsewhere. grow volume that that's of is if look you that and how accomplish take doing nice about volume see plus total that XXXX, hopeful I'm optimistic to And at see to XXXX. when the units. annual got you'll to outstanding XXXX, actually and it's going a what from XXXX volume, to a you origination contributions We're balances payoffs. XXXX to we've total our RESG and XXXX So upward our other an originations offset at pretty from to we're we XXXX origination grow originations, positioned trend increasing were of And

Stephen Scouten

Yes.

lot I sense. think of a that makes

record and quarter. on So the that's great, congrats

George Gleason

much, so you Thank right. All Stephen.

Operator

Thank to back over Gleason, the for you. remarks. Sir? At this time, I'd George like call CEO, closing to turn

George Gleason

there are appreciate If on much. with today. will very you forward Thank that you call call in We look and of questions or XX being right. other we all our you being to conclude days the so. about All no

a our concludes So That great thanks. day. Have call.

Operator

Thank for you concludes participating. this conference And today's call.

now You may disconnect.

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