Bank OZK (OZK) 20 Oct 232023 Q3 Earnings call transcript

Company Profile

Participants

Jay Staley	executive
Stephen Scouten	analyst
George Gleason	executive
Paschall Hamblen	executive
Manan Gosalia	analyst
Timur Braziler	analyst
Catherine Mealor	analyst
Tim Hicks	executive
Matt Olney	analyst
Brian Martin	analyst
Cynthia Wolfe	executive
Broderick Preston	analyst

Call transcript

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Operator

Good day, and thank you for standing by, and welcome to the Bank of OZK Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like to introduce your host for today's call, Jay Staley Director of Investor Relations and Corporate Development.

You may begin.

Jay Staley

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

to take and call Officer. questions are President; Joining Hicks, Chairman the me Officer; Operating your George Gleason, Wolfe, CEO; Tim on Chief Hamblen, Brannon and Chief Financial Cindy

We will now questions. up open for your line the

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

Operator

question. Stephen comes And our And Instructions] [Operator first Scouten Piper first from Sandler Companies. one moment our from question for

Stephen Scouten

comments time there. a may space? could quarter to the been occurring that's Great of you're I quarter. really have wondering And that like I'm obviously, well. from some growth looks in origination you that's pulled it some done here. management back be I'm fourth would in comments you the guys the curious, assume give a And when your strong competitors pretty guiding if as

curious kind of happening category-wise? originations just seeing that's the in today if of what's So, kind -- and pickup you're where

George Gleason

Brannon, do you want to take that one?

Paschall Hamblen

question. would region. an for we've the Be part the in talk been projects region happy differ that to to, a It's That from to as year interesting seen is in the we've great of you. Thanks to of explanation. seen number slowdown that Steven, some generally

remained of to regions. the the As time times And year, even we've strong, said region through of periods has other number in Southeast. certain the relative certainly a Southeast

leverage out But And out activity despite are continue in we we of that there's as time spread. Southwest. going pullback from our slowdown try into over region competitors press also there. to very on, of continue Texas some deals a the in expand and on that the there, number been to on good and the yes, see down So have, to

So, -- close to and fewer great in true very number and were still improved deals to of disciplined But cases, with origination. with competitors deals, pricing metrics. all the approach out able time, a to there stay many our leverage

So We're theme in what other terms of continued be would and the loans. of multifamily industrial. types closing

market a of few last over in of I office quarters couple a opportunity lot Miami Atlanta mentioned in our think condos Miami the that markets. is I've times that covers are seeing the the

has some are opportunity. multifamily those for seeing some see the industrial opportunity as there the a lot movers. we're big where most But use there. been, and good But part, So well. had we'll mixed in of We've

Stephen Scouten

I Brannon, that. appreciate And Great.

what loan this you're You funding obviously I cost? credit but on based new production? spoke to kind that would there. are every getting different, feel know compensated you new you, of on and And is guess to paid that relative spreads seeing I spread and loan growth What well well are on the incremental you

Paschall Hamblen

on the type depending type. sort depending say and the Absolutely. on from we're We've that product is. to Xs ranging into product Xs materially where spreads mid-ish differ I our talked it But how up pretty the about would of

Stephen Scouten

driving money? are and you're of earning say staying to like, how thing pushback these longer. some see conservatism for Is staying thing do for then the thing, me. I this bad as what that of Okay. though a from you market books the guys good assume kind RESG but reserve, I'd And a around some participants longer? more speak just last loan are around loss been the loans not loans on maybe the, Obviously, has even

Paschall Hamblen

weigh and can on one this Well, as well. George

we have this than first point would year. I think I had that more originations payoffs out had we've

evidence as can capital been up significant increase, quarter-over-quarter from So we but it's out and a numbers the there refis. with paying not every they have as other we, the They're of off from market. off you that see They're us reported, developer income a with of new and owner. some just have of come And or borrower even a properties the sellouts method. that lot cash to sales situations in off into pay paying in

on those having noted, the as we loans. well getting for But book and you don't our paid mind earning are and balances

going slower capital. a continues were the look, volume it what in repayment done, but So still with known doing with a repayment volume, we've has people market rates they've to to been we have There's be.

pleased would I and surprised, in, come that whole numbers the the not payoffs say the see they on we're to So in continue to do.

George Gleason

price clarify is what over Stephen, the mid-XXXs spreads up XX-day the loans don't that SOFR we're terms we the spread RESG the to our all portfolio, our index. in think for he of me said in Brannon just the in said predominant who references typically I SOFR listeners And use kind ranging that a the as XXXs. time. let into

And lot So the indexes that's as just SOFR. we're spread referencing SOFR. and time, of about all XX-day over a different spread it there talk terms wanted but over We that. to clarify spread I are a

ratios probably to loan-to-cost our Brannon every down but down generally And a now point leverage have over X our probably versus is leverage loan-to-value, quarter, years on points a the XX percentage somewhere X, points that was years, ago. are that X last originated quarter-to-quarter-to-quarter down we're what not had made trend between coming X and

permanent to and the times for stay favorable echo solution. best to very their what out to about books I have loan very that's just loan longer, are So Brannon being is reticent where cheaper would quick trying to to our thrilled of refinance quality. And figure exit lot we're loans said, a wise. to Sponsors exit go are a credit on sponsors death

that's our yield higher our and loans loans the on keeping So construction books longer.

are points low. leverage Our

of extended happy time. very an loans we're those on period for So the to have books

Operator

question question. moment Morgan for our comes next one Stanley. Gosalia And And our from next Manan

Manan Gosalia

a as question. that just maybe to follow-up So

good in few as growth $X.X had about the over you next XXXX? to consider think a that increase. run a rate we I balances funded go this quarters, Is think quarter, As through billion we about

George Gleason

don't that to guidance. willing on growth. we that I in know lock good expect we're Manan,

year, giving Well, guidance the the we're specific on in yet total loan our next January growth on probably growth XXXX. for or not the for gave Over specific but year guidance in quarter. that call expected some

to in We not expect here, it yet. lock growth I'm to be a but a nice on number ready

Manan Gosalia

And then on All credit. it feels good like quarter right. credit, enough. Fair on a just

something the you quarter properties properties some Was into versus LTV less reappraised different As the that we had were of this fundamentally last? compare about much this quarter high migration LTVs. quarter, there versus last reappraised the

George Gleason

that. part the the based process, to time on a strength those a quite loan-to-value we just sponsors sponsors of and of a as due to cycle get was and where his continue just extension, renewal, downs these an at quality RESG continue loan-to-value of for migration the of reflects few at underwriting. closer It's loan back on job reappraisal the teams from in an to of extension That out normal No. on lot that paydowns the we loans to there had the the unique excellent of pay upward of assets. what an about and reappraisal of would the nothing do was getting have Brannon values maturity the bring

Manan Gosalia

the have increasing in and on if credit NPLs real commercial the business And seeing the Got anything Some areas been side? is you're operating? your you're I different you're of seeing their anything different criticized was on know also different, wondering but it. assets. I your peers estate just where

George Gleason

is the on to No, with the I'll excellent our sponsorship, let I'm that. our contributed the quality projects, new so the that performance metrics But loan-to-cost of of low projects loan-to-value, has construction our reality not, these portfolio this far and cycle. Brannon during quality the leverage of address combined

new We sponsorship, fundamental continue to portfolio going the low a cost, low those great relative perform to well continue think loan industry state-of-the-art that forward. are to ingredients, will our loan-to-value, on assets, help to basis that very great

Operator

Fargo question from our from Timur comes Braziler And next Wells Securities.

Timur Braziler

up I a on question. Stephen's X-part question have following

could balance RESG. long paydowns contractual normalize, and guess, C, how the you, headwind staying these B, longer is loans just sticking of should for longer much how a, cliff time"? on can in growth or much construction versus market "normal a a that's refi on put in stay to I how loans sheet a or then reengages are loans number a might the Just whether status? on 'XX, be? And we these that limit 'XX expect as around whatever there within a

George Gleason

some exactly It's that it better lot or exit length to which with Brannon statistics they're an varies paid ]? -- me is for to but alone the time so of I so where markets for from forth predict, stay to a How have will a sold? hard waiting loan because recall status loan and duration refied shared them to of of construction earlier, the in [ many off trying and quite and them, sold exit. recently and forth. The And how going loans many them can't properties so I'm have on

him it. it may answer it, that, and share part let Won't that give I'll So and answer situation. color of that will little that of but explain on kind a you your question

all to the things a permanent cycle or banking quarter that to been get a our keenly that hope in that sponsor paid wafer originate our aware market lending what loan. develops be our will equipment off be asset-based RESG that a the now better and that to don't accurate from And broad-based, at replace months that's our will payoff. time normal volumes payoffs have that to to have those get of you're would or exit, we've going are assets because commercial sentiment a A quarter they [ got today in when structured now, And XX exit wait and that execution year we our from teams, business our to teams when position and extend a we that this finance build in a ] diversify will yes, a teams, time. is lot payoffs teams, is point business

and our that sheet very one works quality the that balances things building good loan on really our we from comments working team and goes we're of we're some that, help call will payoffs to back we're add quality got the get in sorts in grow we've waves members cutting our positive We're origination back grow and the and future. chunky think continue on that banks to infrastructure, conference staff. in about that even us are the pretty when of really team, I other to staff I of made our last So building of some our balance that hard

X year, future are accordingly. what into years, years So X X planning the volumes on in we're looking those

our low escalated with X, why for those and -- metrics the a on right our is on all balance in that's and paying environment iterations We and continue And our time. ago, we preparing trajectory our years so part we X always structuring have portfolio ago, the look going that this loan-to-value to X changes sheet in cycle, a as X, of ago to do and we're and with and steady an doing years now. years and we're to looking the loans where planning rate nice X now rates of were our into future type And conditions plan with X, well periods We're off X through economic change. doing future variable loans credit. that now in forward are performance years floors were our in

Paschall Hamblen

a were actually move sort one Filling refinance. count believe, XX you, to forward with right, of the out construction year-to-date borrower if alluded vertical I we earlier and to land of ready George. repayments, third-party a had, We I that those had that off got had I But XX, the it loan we've paid that is with loans. loan stats my before. for XX we've had

loan So we new essentially into there. paid moved and off landlord a our construction

that been repayment contracts out they a been sold but And over not sponsor that outstanding and completed sponsor I building a industrial then vertical move those lot their the had few and by sale. number said, had construction pure on a are condos off time, that we sell cash a have decided XX as properties the sellout, so condo at so the projects were And repayment loan cash paid balance have then that we X as that moderate that we closed And a of either we hand. have had to balance then forward the that complete sold had outstanding closing. that on just nominal would would then of had

would and over and shorter. times So, there been has is there just have on, long age back where our times, than been a longer I it been look, in you time, it's how they're say average been staying it's, and terms of have today, bit look

But as rates it all you you're the locking one of are George sure environment that the for to, sense we're to alluded lower complete in. down today. get want terms makes the try in to while, a than when -- it And

And to and as expected said, we it we're on be balance while they're so happy, it's playing making really the we out sheet. as return very to our

Timur Braziler

And then the credit just on one side. follow-up

vertical? you're and conversations just And seeing going sponsors provide the land as with around You decision updated in of Maybe mentioned just to portfolio? having some now what their vertical. land loans about the go some conversations commentary to you're

Paschall Hamblen

we land on you and as in had, at initial have comments land our I shorter-term plans we've forward. end the the LTVs that some significant land of loan circled of in good We appraisals day. drawn with as land terms are, sponsor there. stats past, And I some portion in think, different think, I were showed our the forward. a once color, seeing mix that that completed thought appraisal costs you of up And stable that portfolio noted said, the portfolio the a X move of and as declining we move to included There's pretty they is would gave sort of those said, the we the

move we that had forward. did also not X mentioned I But

in the what we're a to in So of forward seeing just moving say, forward, period rate construction where going and refinances for some X like Xx and think we're that one to just forward. certainly of loan whether moving portfolio. and forward. going with that's, with those a uncertainty loan we're not for today's at deal that still environment, situations vertical enough it's, wait. And economic decisions land that's have some It's makes move same our or seeing number outside -- are in is want time, to room we're move us the it the got to a we that And X, move

can QX. about some I in our information there's think you some, from originations thoughts deduct

it in there than it and product the all again, to and So on the markets depends make that to and return develop depends, there's down market. more versus takes comes can one cost It room certain that another. the types it are

mixed a it's there. So bag

Operator

question And our Catherine comes KBW. from Mealor from next

Catherine Mealor

to wanted side to just funding conversation. switch I the of over the

'XX, Just growth? about ask about nice it's how you're thinking really funding growth. As we look through CD

at you reprice you cost ultimately the, you a from to course, of X.X% fund Fed stable stay for of Of in about today. we of peaks blended Where do you coming higher are as CDs? the cost. kind kind pace continue say, think where think do a you let's X%, that's as funding How if grow

George Gleason

as growing our is are great tell deposits majority, front, Well, out the I we're savings deposit market nicely and are experiencing interest-bearing or a or for would vast and sucking accounts. Catherine, the alternative on customers all and almost you job what lower guys are of doing and time investments noninterest-bearing rates savings these money and are available non-time money other CDs on banks higher

that trend trend. industry an experiencing So is We're that.

as are, year, we've will the having upward cost pressure and time because as deposit we deposits, since Fed and We that deposit April will will will talked growing last continue, that whatever. up or last connection great have has in issued if down go on raised call mentioned, our quarter, as X expect X we quarter's frame are in get success CD and felt put there about this last some or costs that increases rates, road, you that the quarters impacts Fed increase Fed or repriced of over when with staggered quarter CDs CDs the that the is increases those maturities,

that interest very So has know as broadly would back, nice and why there's this that said That's as than and an trajectory expansion gave quarter some X spreads quarters, give core X the there. will said we it. net of We of we and or back over reprice our of last X upward margin occurred happen. we faster expanded some we've that last loans deposits

continue happen. We to expect that would

what were FED's market is the knows trend exactly what hard X, the FED's know to rolling I to don't And they know to over So going exactly think do. now rates don't were exactly than because goes. But going then. where now the up for we're deposit I it's do. and they're ago, pricing higher that their X, CDs quarters X priced are that

it very our are sheet, much our our guys a how doing balance in particularly we funding great balance job a considering way, doing growing what So I and think is are cost-effective of sheet.

And the workforce super [indiscernible] about branches, in good X,XXX, deposit they , on They're retail other very feel branches. we're wonderful we So team, Drew and people the the in pleased the guys retail guys it. Cindy, with doing are that. Harper, X,XXX those

Catherine Mealor

just see in argue NII the one in you've to potentially I we've but that few has on another inflection the grown better year still be little from few But of industry, dollar we -- NII growth? calls you're catching you've you seeing as the much. that quarters actual a and since NIM your origination few in past with And growth so volume should the held quarters. cost higher. would that that up also bit the the this better next been But The of the falls deposit banks could grow better could the then that's assume about NIM talked been really reflect just able this and

George Gleason

margin, I think to that be call, in this, race. where as It was I give was we were it I income. Tim going to offset quarter way remains did be in as last to back horse going quarter positive our in think third a growth earning it some to characterized to we be the it average of going were growth said it the interest net interest And talked assets. whether to the not would seen. and and conference that with achieve we was able quarter's have net or that a in about And We I

were of we third over quarter second I think million in $XX this interest the net quarter up -- the over year. income this about

we we interest coming meets quality running pricing net that the handicap to right in now, that improve the net If put it same. horse wins which goes horse growth And little do record I a bit we a as It's goes not standards to I race. don't And hard So outran best if horse. keep it's can't it quarters now. probably really do or and growth to can't future much shrinking and same toss continue or can be that the going stays -- I maintain a working it. book interest we quarter-to-quarter-to-quarter the up predict but that as up keep up the horse as know, come it margin how hopefully see to can we're income. down little the but our in possible. can margin standards right Book as but much the clear, bit quarter

Catherine Mealor

and list credit one correct? loans, comment on just this you mind clarifying Is quarter. don't change that you the that see to If any watch On did not earlier. question [indiscernible]

George Gleason

do Tim, that? have you

Tim Hicks

management that Catherine, but nonaccrual. talked substandard have already the already a no nonperforming, was we that Obviously, about going loan charge-off was from That It loan. the that in loan just specific of haven't comments, substandard those don't loan about. go performing substandard to increase one to at have did our a but RESG, accrual did million. $X.X small we numbers, hotel significant I talked

significant risk So movement no classifications. rating other into

Operator

comes next from from our Stephens. And Matt question Olney

Matt Olney

more RESG to want loan I floors about portfolio. the within ask

the I the resi level thoughts respect have updated about think new with or loan than the can vintages. is past to dynamic on significant floors older of floors? the calls, mix more and because an resi Any loans provide you talked color you of loan important originations

George Gleason

about talked originated than loans. have typically the quarter every off, floors volume. Well, we've newly much lower loans pay Those when on and that floors we older are

desired chance loans to within down if So us RESG rates at at floors the that cycle end these Fed they recycle for does and our then years is be X favored rate or of that vast helpful to scenario that, the the longer. Because Fed their stay is or a X/X of higher get floors a of from will the in which environment. majority very we lower to tightening

beginning because mantra market for face the that's concept, to hear to for our to we profitability. likely a be higher It scenario of time is reality. smile the best every longer brings my the embrace So Fed's

Matt Olney

able Okay. the excess guess, switching I appreciate I growth the the some capital. of commentary. with year, you've And been guess to the I this deploy capital. over to

ratio XX.X%. is be allowing I love the that around band in environment. updated CETX think the current you would comfortable lower some capital ratio estimated that specifically, be And XX%? around and thoughts operating Would to CETX you'd what's you guess, to thresholds drop below get comfortable in, I

George Gleason

capital's You Tim? are horse. the

Tim Hicks

we I mean decline capitalize that CETX levels during see in year, same an significant we decline in being X% the like Matt, had that capital growth in balance through unfunded of growth earnings help organic significant have the whatever the seen I feel a have our over our for we've the growth. growth, sheet. increase majority of has the Yes. that the loan loan anticipate used We the year. And capitalize pace some us some on in to question. pace significant of growth. past of that but don't past quarter, our allowed would funded and of over But ratio, the had strong capital. increase did small very we of that still as in you a ROA have vast thanks excess noticed We've would

seen CETX. So us in you've XX% not go below

point. quarter X would and a over our that time, declines we at this of back way if up so or work further And be thought generally have my

Matt Olney

these in now I first stock where I the Tim, the the in part you guess, activity we're that second the no think be year. valuations but more third part active with the then, around Obviously, would of buyback. were of quarter, And

the So any buyback thoughts here? from updated around

Tim Hicks

and mean our I in we'll you are growth. on to focused growth, saw continue be on Yes. loan our focused organic comments, we

continue tangible on of X deliver, we've quarters, for over common to We return the XX%. had equity last a

book has tangible per Our value year-over-year increased share XX.X%. at

back I XXXX, XXXX, done the a rates really XXXX, back good advantage capital a low So over of think we the and really to We of capital our to of in years our used we've go buy issued slower that job if at stock. coming growth, you low XXXX. managing point lot capital took rate when we had that

buying I XX% loan our organic ended started of think we've year, we back a up now then the outstanding shares program. we repurchases. nearly back so great the growth, lot had of on when pulled we share and this And

levels, the on repurchases. share to and as wanted for to, meaningful focus how be opposed we've that we've growth on think I managed good just focused the share to got capital forward repurchase, prospects and So we going want

in stock expect have very However, active XXXX we the we values at price. to would another our be still compelling, when sometime are of do authorization right continue

Operator

Martin Janney Scott And question from LLC. our Brian Montgomery comes next from

Brian Martin

back one just margin. Say, to the

guys I of you of the the -- kind there. and dollars outlook talked think you George, NII about

That of next still the originations? then you're things it? right Is over that still or as pricing new taken kind does margin in of thinking maybe past the stabilize and quarters the the commentary about how of based ] on the reach you're seeing on out play is. Is has of way of to [ the trough quarter once the to kind a inflection point stop bottoms far Just kind of here margin that about past couple think the the as in Fed that X that thereafter. cycles kind here

George Gleason

would I a flat and either just in what get Fed to moves if we environment, there's no tell say, in that way. Brian, you regard, 'XX Fed

XX but quarter laddered in big chunk the issue time very really small frame. book, a we a frame a time is in the chunk new it's CDs, issuance there's X-month throughout CD Our every and months laddered when

of will last CDs after XX-month have months basically done, the book Fed the move. that and when final XX that So still our mean market is the repricing stabilized, Fed tail deposit see you'll rates

the to. costs probably really is there. it's to rising stopped, quarters X [ back of get phenomenon, a stabilized to get cost So If Fed point a short where and it's full ] quarter deposit deposit probably are to X in

Brian Martin

makes the cost exited September, that sense. or? as far where on would as month deposits of the for of you And That interest-bearing then we have

George Gleason

it, I have do have Cindy, that? that don't have someone but I it. here you probably has

Cynthia Wolfe

I do. Yes,

September X.XX% So to compared X.XX% was the quarter. for

Brian Martin

versus X.XX% X.XX%.

maybe Perfect. Okay. then And or X X others. just

the on expenses in Just quarter. the

some you given kind this moderation still you the that of full the about but how think the thinking about year, you've expect is should year, we kind in in investments and guide continued decline the talked a albeit see mean saw growth quarter expense the year, and forward in and you're made of I -- expect the rate investments? thinking making the into for just that it of expense of just going outlining growth growth decline look to a next -- as kind we investments the about comments. you've you're in management I

George Gleason

please? Tim,

Tim Hicks

yes, would salary Yes, some in increases see through lines, expense significant you pretty benefits. you if the Brian, look and

insurance increases FDIC growth deposits, then given the our advertising rate on the has then, entire in see impacted You'd increase the industry significant elevated. X/X certainly been and in of that our and course,

bigger growth over generated this expect I year next have to would a rate So what year thinking year, for year-over-year. those compared

has prospects our in to in in on invest adding And how good that our possible. prospects for so on on we do teams bank. what most focus people, more super to for invest on quarters. However, how But we've try got efficient ways bank, the the coming about we our expenses, our throughout talked grow are good growing we grow focused do growth. new we is way George expenses, do bank, focused we but we're

And, don't had our to the that of but in on year-over-year, rate expect 'XX. be we I focus. So same rate increase that's the of increase really 'XX at

George Gleason

quarter. Tim, second noninterest was go quarter a comment this. I to that would would generally fact and That's every hundred forward. expect, I the few would on going that quarter noninterest third can comment expense expense below dollars I a expect you anomaly And countertrend thousand up

Tim Hicks

that Yes. I anomaly. growing. We're would being an agree with

Brian Martin

Okay.

to that. here. that how somewhat talking about the about the next how being are pickup don't spill saw we just occur loans And way payoffs some RESG mean the of year? the, And cycle? I this? right if I that Now talked year next of it you long we the see, I books the I is payoff on guess, this then be some thinking Is likely about to front, about expect on and that the payoffs muted year? the should still into mean, kind

George Gleason

Certainly, in think depend the a off a have the you the generating to expect we'll this going if somewhat an next It's because have you're if we payoffs paid emotions, an want the of it's is spread conditions, year losing year in secondary them projects we rate the year after. this to use will sell also might, improvement. Every to tremendous payoffs, conditions hate and would nice not it's to I migrate to we're of income. guess, interest probably And in out, enjoying we them. an of shouldn't It's That's guys would expect I see to have -- that improvement, on they interest time so off want it. improving would to I mixed improving off are environment, some I payoff rate or try trend, when very that correct or payoff volume to migrate trend. market next sell still market that improving to secondary market but that somewhat But out or increase able the typical earnings forth. an dynamic of pay more year. see an

and pluses there's it's So minuses ways. both

Brian Martin

then the RESG. And you. Got one last maybe just on

With level third quarter, out kind guess but at basis? the we're I the originations have going picked as quarter And I steadily level of fundings, here. 'XX. continue that not the to we fundings year blended of I year-to-date each and pace type year-to-date I the up look to record in current? that in kind is strong a guess, sustainable into maybe given, is on originations what's given fund this think at of 'XX, 'XX guess, the guess, up I a of

George Gleason

cadence RESG that and you And volume will visual what of an a fund funded said management the and that The the for And would origination in Yes. of comments of originations. the tend significant of in in up record a in fundings funding to continue big our included years after out team off leading in performance that as XXXX. you that chunk originations gives X now to -- lot that of mostly years in X fund book our after 'XX picture is what's exceptional the payoff cite times, I these by pay XXXX we've fund portfolio the cadence the and you out is of to chart one, XXXX, to we've indication kind 'XX was that that years, and that book. loans in to obviously, of still X X gives of

Operator

next comes question [Operator our UBS. from from Preston And Brody Instructions]

Broderick Preston

I of increase just the to guys if much? question costs. on give just all start you at to could new us how an kind a to the Have you your the wanted as had for so, just deposit during And indication offering maybe on quarter? Cindy, rates

Cynthia Wolfe

and slightly as bit went XXX Sure. a was a in the We space. our competitive from of little of result increased that the during movement XX-month from quarter to XXX

George Gleason

like high customers, rate. APY XX-something from to probably And is XXXs Brody, on that you went XXX, report rate more the XXXs so that actual the something, is is actual the to to like

Broderick Preston

Got it.

one maybe the to basis this quarterly quarter. just Tim. Okay. a better a quite yields, then the bit understand beta wanted And loan slowed on for I

new ask drove it And Or yields? Was kind of that? lower coming caps? in at do to production wanted the what any rate RESGs so does have I -- of

Tim Hicks

-- have structure No rate the part loans are third some of is of we caps a counterparty. where as a rate party the counterparty, their the caps RESG that not

benefit the all increases. we in So of rate

did other increase I'd in yields what there's to from and in that back But that. talked associated an perspective, a still had bit. seen subdued fees quarters, any little that what if bit little been our normal there. it go a QX within RESG with a have payout was on but minimum we've about, Brody, the lower nothing, that contributed level There impact. had certainly at of quarter-over-quarter end that are generally That compared the capped but range may was it other at are generates we've lower volume have nothing that has sometimes in than probably did look interest. a normal to range SOFR at to capped SOFR speaking, QX, So nothing

George Gleason

Federal increases. the rate is slowing of think factor just rate I biggest the Reserve

daily Our monthly. adjust they loan rate, or either and variable yields are mostly

rate loan moved Fed as the the slowed rate our in as of increase So proportionally. of increases, has the yields has

Broderick Preston

the I ask, Got to like back versus to on from it. kind that and How guys anything to giving prior that? compared of just move us a pay appreciate all stats how looked trends I stuff. I RESG. you look on Brannon, the you periods? refis, to third-party downs mix to like the payoffs as back or straight on really want that kind do that between take year-to-date of exits wanted

Paschall Hamblen

I I would more guess paying that mix be that. more if what started little know you don't guessing to refis, pure a attention Brody, the probably The was. recently. bit I would told but be We

a curious I think quarter, we're last we and got incredibly here. all question

like over there So you different. you, for was have I refi I today's roughly coming that's in stepping But much from ready world. we result did of how felt stats but payoffs I'd those pretty be positive to the a far out tell XX% too think

Broderick Preston

it. Got

I that's, think it to got know a perspective, process I point due process. it sale to noted to I you standard somebody OREO? one Could of I one ask of that loan about a thought I'm asked speak kind it, sorry, if big you there, but hear you Okay. was in from I this that's already, got the anybody kind the ask and you sensitive I subject to you diligence. didn't, to land didn't confidentiality at the this in maybe under be

if So the process are far I for you this actually how at due sense had wondering diligence was point? into a you

George Gleason

Yes.

Let very pleased and foreclosed in have it of that. those real it XX, They're to we at under those, different largest September of X total happened we a X X and got, of me was contracts. were the just gotten X address pieces so estate. We've X of states, had

of our XX% under balances OREO So are contract for sale.

standard to X As you them book value. Each would we'll happens. of and sometime clear is requirements the those and subject are Each as what see Brody, case. of all to March XXXX. XX mentioned, of of before due our conditions contracts close scheduled closing is diligence always those And

Sometimes contracts unless close, to people them legal put to under intend sometimes go they time typically, the contract don't to them. close and close. expense don't But trouble they

So we're pleased that. about very

that majority balance all them thing. These about contracts the our in good OREO is as of various fact, all these book confidentiality in In our them a vast and clear provisions a of contracts. customer have

So to on it to at that this we're limit general time. going comment our commentary

Broderick Preston

you've it like to it, guess just aggregate it. about detail. XX did year-to-date. of tried is At appreciate when kind appraisal that and getting data quarterly it's And the reappraised you ask I I I looked least last And want Got at quickly that's very billion. And that also then to $X.X disclosed that projects I just I night. helpful.

about a XX% reappraise to be a So a from pace expect of what commitments or either that on to number like XX% that's perspective? XX% normally, to it, way kind either Is year? should it you per cut dollar of your we

George Gleason

feel going an coming we for I usually to an reappraised. are up up our going get appraisal. are loan-to-value on what's in as-of-right we're for on have is as-of-right or Or that a when depend need a attention extension extension have them. loans that some getting and we extension it's like don't And what provisions to because as-of-right loan extension requirement part maturing our that what Yes. either mean coming to

So you a an unusual. nothing get reasons are get an there extension, that's appraisal. variety there's But of

that it just would volume. unusual about we the It's say me Let normal way. do nothing that. There's way

factor XX% of Now the quarters, the over portfolio. the in XX if last you originations another that's

XX% which within last the you is what So has ] pretty XX of XX% something [ that the portfolio months a tells probably appraisal to typical. fresh on is

Broderick Preston

Got it.

stats the George, based to average reappraised see, On end about though, I say, so is far. Okay. Suffice on the can has loan-to-value X%? a less our than little that. we in the XX% appreciate it's and change been

George Gleason

doesn't loan-to-value I X% substantial if Yes. is the average extension materially point paydown. different than it at would is And as after out what We the change of was meet of or that get requirements. that, again, origination appraisal right an

cases, line table coming many the criteria in with sponsors extension them to on are paydowns our To those reduce in loans. requirements. back with Our

a reducing to lower good it's are to back downs and of really X% a those loan-to-value. but a the result that pay is So number, balances plus appraisals

Broderick Preston

environment. would you there's Got for at a How it. everybody And did year us you of me one you then how rate XXXX kind stress is I X%. think, assume there's ask exit cap of when big in were kind and would what -- how of shift wanted guess, in the you projects? Like how last were that I these guys, rates how assumed origination cap you to still just to the knows underwriting? cap big you I what that obviously, I been, do underwrote give was given And on a rate the guess, been kind interest today? was your compares just rates? environment be Like of helpful. that of like kind rates anything can current kind

George Gleason

basis Yes. run in and we projections performance project point We of right loan the stress performance that our beside and up XXX projected coverage the basis project, service sponsors the debt XXX of the points used using ours. and increments, projected of the

look underwriting XXX, refinance expectations market, are the what look refinance at and XXX XXX, expectations take looking and cap XXX So up sponsor's those stress under and XXX, market our that versus property then part XXX, rates at we cap market those type XXX of We up basis we're points conditions, or rates, XXX, XXX, XXX, permanent at current secondary points. XXX basis basis XXX current up What points. XXX, and it the exit for

XXX target X and for the basis with we what lot funds that of bound. rate we the the rate points. Fed is Fed moving From underwrite lower a So have certainly interest seen stress,

in So very been we our for and very which ourselves. very and have appropriate there environment and helpful methodologies sound find the

really equity out. one significant focus doesn't a does down have I stress you got leverage that the get rate like and that's risk, a that's, low solution where these it enough, is project if that's we the much stress. And played our you and risk. to market stress how projects the think, it for Including and in to are is, on as we loans so so So you can well these leverage reasons of and our stressing projects interest just

not industrial thing cap Fed is on come but such types and have as sciences with on cap interesting rates the moved apartments life have cap property tandem and up, nearly rates rates, move. Now in

really of some up to now, be cap the the permanently situation, to with cap and that. point, seem in with [indiscernible]. those in a years X.X had they the high going Fed been product we But So is from are the think going further low are a Fed X, rates a lower up Xs to if degree reflect readjust XXX from that to see magnitude that's than the catch target tenure this movement is period sort points. It's they to has of of basis points are Xs, And to rates catch And the to come at rates fundamental cap we going rates X we And basis shift. now, right has fully we're we've ultimately in environment where where some rate environment over now. in permanently that forward. X, funds rates sentiment less basis moved see to XXX XXX interesting points X.XX I us going changes cap if in

degree to some of valuations. support providing that's So property

Broderick Preston

scenario, underwrite degree, that the that loan of about just you perform XXX, off left when say when event? that them kind up you what type you that do to Does to that that the stress cap points. the and said tail even rates? stress basis in when You you pay does rates George, still you cap get XXX loan mean

George Gleason

Yes.

a we There rate have a best the to the XXX-and-something that don't XXX stress, exceptions rate RESG cap handful loans I rates. the can kind cap On them may points portfolio. vast still -- the of tolerate on is stress closed been that basis think cover loan majority stress and the I loan. But have cap remember, in our in can of tolerate of wouldn't that

Broderick Preston

I have that. the appreciate sneak lied. know office portfolio you one is what it. this I'll to Got I on in reserve the more. Do at point?

George Gleason

No. specifically. broken that Nobody here knows out

Operator

call the see this I time, questions. remarks. over turn Gleason for back no at And George I'll to and further closing Chairman CEO,

George Gleason

call. you about We Thank forward All Thank you appreciate guys. in a Thanks days. XX for you. you, great quarter. rest to joining questions. talking with the the right. good We look of the Have

Operator

This concludes call. today's conference Thank for you participating.

You

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