Bank OZK (OZK) 19 Jan 242023 Q4 Earnings call transcript

Company Profile

Participants

Jay Staley	executive
Stephen Scouten	analyst
George Gleason	executive
Paschall Hamblen	executive
Matt Olney	analyst
Benjamin Gerlinger	analyst
Catherine Mealor	analyst
Manan Gosalia	analyst
Tim Hicks	executive
Brandon King	analyst
Brian Martin	analyst
Michael Rose	analyst
Broderick Preston	analyst
Timur Braziler	analyst

Call transcript

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Operator

Thank you for standing by, and welcome to Bank OZK's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Director of Investor Relations and Corporate Development, Jay Staley. Please go ahead.

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

those about to for outlook business actual In in expectations, by release, refer in projected management Q&A session, the other may that vary on earnings forward-looking today's results such public the and filings factors we to our cause estimates information implied or the for statements. statements and from comments future. more outcomes Please may or make forward-looking our various

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

now up We for will your open lines the questions.

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

Operator

question Scouten [Operator line from comes Sandler. Piper Instructions] the Our of of first Stephen

Stephen Scouten

quarter, a earning on again out of this know So know kind bit? of average with into that rate this out? guys NII to is as how based but kind cuts little see race compression I guess, we presumably, NIM I And RESG that XXXX, of about horse should and out impressive lot wondering, talked accelerate playing look kind forward. we and moving guidance, have asset versus I I'm project, of kind occur growth dynamic occurring repayments how potentially a further be which that growth you you as hard projected look your to will

George Gleason

are year we're and cuts. going have our probably November planning that, answer action. dependent I going budget XXXX. would Fed you those and to off in on cuts about a for -- our starting with what to asked, I Stephen, But XXXX, July, be and is anticipated and you the in upon September that this But X is course, of what we Fed likely hadn't tremendously question tell would approach

line that. in ignoring conservative the a a on we've fact that taken gotten more with market's the guidance, the ahead So view little Fed's further little

correct, have on another further anybody's of Assuming in cuts and be effectively part XXXX, floors the in X earnest kick loans scenario in XXXX is portfolio. have Fed assuming in is in guess, over to that the which you'll X cuts rolling or a begin our and XXXX Fed we'll deposit that we large

scenario think while in we So a to the we're play coming race we're have going XXXX, in interest XXXX, we with environment constructive in of fully more that a -- there. RESG lot every income plays is horse generally even thinking, payoffs quarter out, if net in

out But things that's now and is current a So going quite then. XXXX of it. a our thinking to happen ways and -- on between it's lot

Stephen Scouten

back with that your loan come No, that's right. I Yes. in you start the assume said, we'll kind like book. and how your of chart management floors comments seeing And that protects

see this have very stayed obviously a of not but guys daily, estate around a have that's folks kind I helpful. I that And real expected us of side daily So aren't that slowdown, business then seeing a what for of those origination curious on and would lot more extremely in mean basis think originations of trends. on strong. you I'm

what's talk I than demand appetite an about it's those origination current loan higher expected? still that don't if, us you for of side this the on world Brannon, know could keeping would competitive, whether it's some So Or whether some dynamics, have maybe of of projects?

George Gleason

go ahead. Brannon,

Paschall Hamblen

in proud team great coming that It's answer XXXX. be has of our But question. XX.X% stronger. off of should a to done Stephen, question, get more happy so sometimes record although -- we're what

there. There a decent we've are -- of increase new I a managers looking long say QX, from you're right. about that out lot lowest would and end that different would equity funds they and hear seen funds investors I origination. the in they has the have a we've year, there. But are saw of We say, fund confidence pushback moving at juxtaposed into funds against point out already of time. the there an that's that from because This to You that's haven't view, capital lot the been headwinds invested got existing. But for number no, start the getting year, a of pipeline

on definitely then been in have up have that the of that the reticence in table sort So of forward of there -- recent back. moved or and has pulled deals deals number shown but the number their past a

competitors there on that converting the and the well-deserved calls positive received get talked in cycle. obviously, to result think have not out of tend be to day, nearly about I quarter market And you every relationships. a new built aren't loans every being simply a continue quarter that we of their reputation for there space. trend in, our you we the job see is that relationships, And year, from around field, many us guys in execution every phenomenal -- continue on have before. as to you benefit And to existing guys when our might done what with for

just the to that rate -- get expect, talk without we things And number the positive continue interesting terms slice in start given we'll very signs our in year there, to around if to George So already of that question. as market sitting invested, to a of the see the deals needing alluded out. we smaller, this would about, larger in play team. of -- able thoughts be with moves, to some of sort we'll and take that's will of pie has But with that has terms amount the be capital on been increase. pie been proportionately We're how our of sideline

in 'XX or competition above the course, we at -- volume as being well. that months we believe see increase in could Of we as we XX the had XXXX. But stated, could for

Stephen Scouten

one could in one. I if squeeze last quick And Yes.

kind As the is in through to last about other some investments the a guys years, way passing of think is, you baton potential bank like and you've in in where these ABL, to the few categories of longer growth of most is maybe that you CBS, terms stack-rank kind to of loan run? it's potential handoff the whether the think made there make the where

Paschall Hamblen

Sure.

I year. think you good guys mentioned had another ABL. Those

We expect coming that year us. they'll have at another good

as ABL for been our has to sort focus the deposit focus groups, of tell would don't surprise, on has say, have as that ever I relationships. that been And heavy gathering focused we've, So narrowed doing. want I lending but you restricted, example, around what, no

bit those in of, but as be we in of potential to sort really XXXX. I it have what time guys to pick sort at think look might RESG as of up be a really just to we paydown facing may terms an more open in overstatement,

closely at we like might commercial capitalize right Group never group feel thinking mind. able to We're it, continue we we're said, but But progress. be an opportunities future a to comes and look make as you that's So would know Finance on. what that those the positioned And Capital Fund about space. institution be holds, to behind opportunities watching that our for other pretty the as in well our to Solutions and

So that's at today. is where our head

Stephen Scouten

Fantastic. Congrats on a great year.

Operator

of line comes Olney question the Inc. of Matt Stephens next Our from

Matt Olney

seems can about towards loan these you I'm like of of more loans the remain be will from front some RESG dip And ask what stabilization, but seen sponsors the hearing given I you're in growth be from comments provide you'd rates pace here, then insight the there? getting about the still XXXX. curious in but to if have bank. reached any have Any the half request of pace curious, back It the the on that repayments, the wanted just or topic we've half? you weighted loan at

George Gleason

of the Matt's to want you question? on do comment Brannon, part second

Paschall Hamblen

Thanks. Matt, Yes. good from you. to Absolutely. hear

So But Matt, a project. active nonbank timing a and proceeds those have think today not been kicked in -- that in, also active, were supply issue, this there names but lender space. sponsor refi that some There seeing we're a that out are names, have they lot what the there that when that and are been also there. off I are it's are from institutions a less pushed have of largely

trying -- whether they've link think it's is burn bit managing I little particular to like a or just up interest the that rate. to turn -- if off want a and that find next point feel and they to perhaps the multifamily expectations get So it's -- where they time concessions that optimal deal some in

a it's of combination factors. So

I focus going the -- not short a given to been -- the that the But all term good the short we're we've with environment go financing. these activity if had. are mean, down, payoff pleased term to comes and we're in, permanent of as we've talked it about we've bit, because on I

lower higher getting higher us proceed with Some but to trying interest with proceeds, will certainly jump loan presumably from not a impact, proceed but minimize permanent the to rate the loans. necessarily loan a

with play guys more there. So in curve rates there, are you what's know short-term and the the all happening

So waiting on and that. pull trigger get delay there the down to may be some further curve the

George Gleason

not to, is construction a as XXXX, gotten we or which the were but Brannon bridge on next apartment alluded of last that couple or we of and relatively in X, going lower to increase higher direction we deals. alluded Matt, further financing, the ago the happening think lower, is of much -- and permanent think that, loan from lower loan is in that from over financing, our a lot comments, payoffs to management to Fed's the to our down a have higher the to levels create interest either bridge our Yes. weeks rate going construction And expectation a week loan, to level that rates in from rates, in as that still

still on active apartments there's the there. out very market refinance So a

we I on together item which predict The be expected year. going having can linear fact think your a this will give that's ended. over We you that. that quarter I could of otherwise sponsors the probably the equity is some Brannon the growth just guidance the of the pretty quarter-to-quarter, were we terminated, first from presumption the an can't several higher quarter-to-quarter? give part point originations to. But is that have question because guess, putting but level opportunities vary would at best to it, you delayed on course fairly alluded we trouble It significant or of probably got in is, of

in another delayed and everything one challenging to new year The get get equity or for ago, on are late the that very moving challenging fairly a takes process that, years slowly. reason get board it of more than closed drawing are months get the don't and another or was new few couple together. Deals guys that equity for interesting a things and had getting is it projects

So a things close had plus last in a going for quarters things accurate. we numbers minus. are than year. sooner number or were couple around every a this but quarter-to-quarter the to confident done and moving X things or We those, some have got or projection to of are we I'd from a be for those of share those But were delayed that indefinitely. quarter those X from closing last if expected. getting quarter while quarter perhaps the And

predict quarter-to-quarter. to hard it's So

even I think your distribution. would fairly a be assume assumption best to

Matt Olney

XXXX will I appreciated think concentration, that I just management loans. nonpurchased mentioned likely XX% contracting follow-up, of increase commentary, then assumed the as that and you is that's that. in sounds why loan the I It But any lower RESG had in now could a in peak previous the like 'XX to 'XX. the I the And before commentary. that kind RESG color inflection 'XX. work now mistaken be and 'XX on of commentary 'XX. being out pushed would on -- could thought in in

George Gleason

in in don't XXXX. that payoffs. got the percentage, you certainly rate spring XX%, a to reason about I 'XX, gave XX%, I specifically which know going And could I that slower of Well, understand coiled refinancings And it's infer simply of and spring would because we back think, to the that's that's is RESG up probably to down that. why comment the that Yes. but

some So you're XXXX. that point. expect when elevated will correct that guess meaningful that level best an spring we number payoffs our is at uncoils, And a is of it that in lead to would but RESG

that. of So we're cognizant

that we The groups, tell second percent to last you we the groups, And deposits. Brannon's substantial growth mid- XXs equipment high capital thing comments, ABL finance to our frankly, of growth was relationships year. loan included finance, is enjoyed and as limiting would to fund alluded also constrained by I solutions in them have and potential

could -- more we lot not a grown in XXXX, grown have have would a guys those So their more have constrained lot growth.

were slowing the of higher year XXXX we have payoffs to were unfolded. knew level going because driven RESG a in we growth So as

You could that. see

ability So why to that, business we're do grow. that that's that wave the we units they other grow we we would opportunities have. limited to the And the those begin have business other RESG hope still confident units materializing, of see payoff pretty as to would

will. I Time prove think that they out. will

-- rate. less equipment have that stagnate we're we finance will finance, smooth going RESG or to fund handoff probably of to lot a the growth and pay-downs XXXX they've per in higher solutions, going already achieve finance groups, why there demonstrated exercise think they year the that's to very ABLG But capital structured that's a growth have more have to a that of balances from ability

Operator

Gerlinger of next Ben question Citi. the comes line Our from

Benjamin Gerlinger

week I and time in bankers and local some in the to last knowing or ago, went OZK branch tellers. weeks spent here my think I X Georgia

seems So the of focusing are it bit coincides on was with your the which than expectations for months, like a anyway, a people I CE X kind that's like spoke July emphasizing so with -- one guys the of kind -- brand you specific a shorter cut. that previous, rate one

in that up. kind just more growth, rate in of to you you you pay guys of deposits feel gathering be need a to kind gathering but just I general. the probably was do environment? curious have bit even nimble, deposit on get about you I difficult of if want kind efforts How

curious that the cut? you how effort to So the to could feel you next months I'm other able before pull first deposit any deposit you or could the on probably gathering leverage we rate on X-ish get just over

George Gleason

Yes.

incrementally -- cutting in to little week the correct book, up scenarios. twisted maturities last your or get deposit rate and we kind of are hoping our shifting, we distribution that on of We observations get November with lined X that book we've in have that that starting shorter the maturity tightly focus you're can in a more Fed's --

in So wholesale you're shorter. in the moving that even those on correct focus X, We're months X is there deposits.

pay as We that you out are was is Fed balance billion, where for confident because the they We if do $X.X are taking of experiencing growing accomplishment And grew our so much. that. to Cindy, We we billion. the deposits are to ready deposit most are continuing our in do shrinking it. heck over to liquidity banks system that almost really guys. of really, noted, up, sheets environment was this do fully a And year, ability $X to an again last an in do to year we and feel need

cost head deposit minimize our expectation the focus And the achieve, the more and achieving we're now the also of to need is -- growth shifting align while biggest we with year, going to mix of in deposits. rates the are closely some book point down the to at that

sometimes a team job. So regard. I great that doing And deposit we're is in making daily think adjustments our weekly,

the XXX the you're in branches those are occurring. local the appreciate to I side fact many because XXX, good however is deposit on XXX the level at or what's where stuff But is, branches, going it attention paying our all that on

Benjamin Gerlinger

multifamily. seems the of office out was switch guess you're going every you And could different. a Yes. figure appraisal, that the just little and bit a in me gears a there's would had a X I kind constantly valuation there's oscillation, we is get Otherwise, just obtained. the visiting. open to to suspicious obviously prepared bit, checking I account. some little On stuck have on like X remarks, going appraisals kind actually it But I XX if to of be curious here. with

And than the worst XX% be office a less change haircut seemed in valuation. to little a overall the

these credit of this what kind idiosyncratic Or at probably just is is I'm loans? don't an I market knows a general. higher, everyone in what it's with that are issue not kind of There's just as transactions. marks curious think have down, those of office, but an those expecting? lot such there on a just Were of anything stated, of you I overall, illiquid with were point couple really kind thoughts nature? in your but your valuations little

George Gleason

to that? Brannon, on want do you comment

Paschall Hamblen

hit Absolutely, yes, seeing question. generally -- absolutely. we're idiosyncratic think is I answer moves, are what short And would certain mean harder I great data. hit transactions and I expect. there that but There terms upon with think which of the real dearth probably nail respect we moves to markets you on are head. rate for draw valuations the -- of there rate the cap There cap just can out these is the a in

guys the sort fact But of this make be. be and really given an of of bad not falling over you down we've the to the had a severe. you that appraisers is -- a that given estimate, of which human sometimes of based pleased estimate matter are we these XX% majority loans and bit those with down. in up, like, hindsight, And extremely are is are And we're what all these our course got that -- a quarters low basis, range, place in can, to at lot feel we've the data,

those you're the a -- positive think. have cycle we've but generally uncertain what activity, aligns of sponsors LTV through portfolio our loan conditions solid that's at our do. been and ups loans the of and to a to these reason what incremental, of But a lot LTVs low long skin we're a great such job put our of in lack game speaking, historically with we in at reappraising with of a lack projects don't protect look but back it, in is are, driven LTC, another more seeing solid transactions, it's by they if been guys nature. lot trend And where a And is, economic pretty fact position and a LTV. pleased move originating And do LTV, would limited that more portfolio you a that reason our of that putting in the than of

So we're in see of of And think through the generally rate data reappraise I using. changes. most especially any in by appraisers cap to we'll year. support particular, But given projects accurate to surprised other we'll say what results -- continue than are it'd the not the office, really be speaking, lack and to

George Gleason

point loans would that mentioned LTV list, I credits. all still takes pass the Ben, they also went the loan-to-value the out That on reappraised you there's of into rated rated higher those that ones up, pass but are the on rating pass where account credit.

those don't we problems. So consider are

would Brannon -- And excellent I point. made an

the you the portfolio from whole not and to back X XX% loan-to-value That that XX%, time. point of the of loan in our perspective, X moved range. our cost over X than kind loan value is and more a to aggregate or If last value look entire over the quarters on period the to portfolio portfolio loan has on

while these where also up of because, got appraised having you or originations X has originating loan where like very some we're loans having we're meaningful also number that's we're way, We're value. XXs high And lot gone mentioned at having new XXs to accretive low a a paydowns. loan-to-value where a we've in the

well perform the metric. of LTV on condition to aggregate is the very continuing So portfolio that

Operator

comes line Mealor question KBW. of of next from Our the Catherine

Catherine Mealor

conversation. the credit on Just a follow-up

prepared your year. big had you grew off in a record grow or a mentioned goal percent, pretty coming XX-some year that remarks where management your a you of which still EPS is comments You in XXXX, to have

that question the think we And is, rate year? trend you're growth should where and an know this how how NIM past I versus potentially just think going kind in provision? And reach have of think thinking curious but goal this level see is about to growth so we so all big cuts, I provision if a the headwinds year's as to we're the EPS I 'XX, about

George Gleason

improving the number you're we on correct quarter. we yes, record EPS are noninterest and, and being like and question. put the that some guidance I trend numbers. margin that have a up for will improved And a on net every quarter the rates the in EPS don't our spot-on year, and interest great an maybe off good with know year, income a to last quarters year expense net did given up race XXXX income -- that, year, are But we there every some quarters net story a little net expect year. and next We income tax it's EPS expect interest horse interest versus we we've beat record this EPS think pace. Well, for reasonable EPS the and scenario

our the real landing. achieving our is stable predicated or on a expense that's provision if in relatively that on not don't our assumption So soft hard budget economy. a guidance Fed planning I landing and a just upon that know to

We heavily in number X the been a have assumed we've our of ACL consistently scenarios. quarters, X, calculations, X, now, downside weighted quarters for to

over So SX the $XXX grew and our due Part ACL heavily growth. year, as due we the fact Moody's Part of year. to that it our was we models. of you downside SX leaning significant were was on the that the last model, last million to know,

way. lean to We continue that

and well of pretty scenarios. So range think appropriate is our for a positioned ACL we

and the scenarios, think to the fashion of the and that, if point we the more was a I a that -- economy than economy back that's a the If can benign unless high probably consistent of SX, look in we landing XXXX we're back have in look with lands going SX assume provisioning. then kind

some have could global government expense. Fed, a that, the all were into coalesce If shutdowns, issues, of but quarter. there each to provision pretty issues, in congressional economy, somehow not that higher suggest true. or think we we each I draw conclusion, So a of month that have And the yet with you the whatever, side we also hard could landing course, what flip downside clearly would scenario could geopolitical, we're provision is for

decent chance for seem mitigated But the to a little bit. Fed those landing a -- is growing to seems for the pretty engineer economy getting be actually to and the be scenarios

could that provision So year. next hopefully lower lead expense to

Catherine Mealor

And like in loan to that the this helpful. are an offset provision you book, we you do if soft in to then... landing and see a That's be it headwind really scenario. margins is nice more see lower if paydowns feels that offset if -- And going

George Gleason

still of We would growth, remind do expect loan you good that, yes. I

Catherine Mealor

And Yes. just another then credit. follow-up on

could give can of It here. us from Just you out land loan Chicago kind through play or the mention us special to from this talk feels quarter. like we went accrual substandard

decline. So noticed still I But did performing. that your we're reserve cash

So, wrong, maybe like now. correct because out me curious that's of but reserve, of it's the if feels I'm playing right it how just performing kind interest

how of nonperforming kind not quarters period. or may resolve the if potentially runs to time that have until time how to out? credit many And flip before this that you're we And much able

of Just quarters? kind for next could forward of couple walk that us through over how -- credit that of credit the path kind

George Gleason

a were classification that And That's the on went just pace fact question. reflects that hard a the fact ended credit substandard mention their this. the we quarter to efforts sponsor's that They've here. been working obviously, from in concerned great about recapitalization on we special a the in

record. pieces excellent successful sponsor we with an got a track business. of have of is very This They've number done a whom

this on hard still working So they're and still very positively engaged it. disposed on and

hard caused working there yet pursuing that not still done us gotten fact they've to got and us that. we've out for sponsor that a recap diligently and we've going So do that who's The the got good downgrade. that

that also, for downgrade changed the loan, that drives the rating the and rating with risk on provision loan. our And risk

So $XX.X the comments, our ACL is as in this management disclosed on loan million. we now,

an this pretty provisioned outcome. thing for we've much adverse So

reserve, money, reserve cash that. You're interest I pay the enough don't correct. they've loan, using several They to cash timing their the got of on go know months. and more their to is exact are which there

get run if to to But that and want with for more gas. out and work make to they of out decision time can ultimate it plan end they'll buy interest their payments further property cash of a recapitalization this to when to have develop the or if support their they they've reserve,

So to see. we'll just have

for we But closely, their adjustment do We're of they're thought monitoring that and course, to an assist increase in do efforts, was can the equity. reflected we we'll the downgrade the we and and risk in it the lender in time. can at but reflected the doing do what we're ACL the anything and appropriate it the are loan everything this sponsor the for

the So this. in really ball is on their court

Operator

Our question Morgan of Stanley. Gosalia next the from Manan comes line of

Manan Gosalia

more I the the portfolio you wanted about the to your comment recently loans? books markets negotiate for shorter if been long for ask open outlook spoke the floors some where in given earlier. that given to on cuts? floors changes of And recent of last Have able duration now? the on capital those you talk rate up. the are about And on average if Can can you've any right the you trends the floors loan How there. there any will of benefit been on

George Gleason

guess, the of that rate Manan. we fourth the to loan. the mid-last had originating question, run-up RESG I In of year, loans in kind start the at floors of last quarter even Great lot third and, quarter, a were of year

at the when throughout loan. expectation easy is of that pretty was Fed be rates floors continuing -- to expectation the the the -- loans it's to the to rate XXXX, get is So start as at going raise it the

in more in basis the XXX points the floor or start to loans, rate below to floors the begin start As of loan. reverse in rate came loans slightly and floor we're -- look I some is, still at below that and to And was rate today, the something more forward Fed those below XXXX to going course, pressure would points, the to the RESG when the you start rate. some the tell floors negotiate of getting portfolio, loan, the customers progressed have even moved.

structure they meaningful one that vary all negotiate and of how And So loan these of just depends are credits. from to myriad in features, the one they details other you floors. loan, and on

So they are us. important for

floor And floors We'll for in been loans. breakdown. loans far something. are Fed rates that probably an more after floor basis have obviously in which management of $X giving floor they asked comments less. [indiscernible] the at a current in were a think old XX where have usually I environment the have XX comments, the and because various are start billion at set rates can't raising next X-something loans a our points, been or or started on would may getting old I that you We're Stephen paid before those our management quarter the the floors that, quarter, -- and table below you give quarter shows off time

those those floors quarter. that's also loans about obviously, as extension loans are getting higher those usual the And and loans a basis, point $X with degree as of off floors. that we're On with having on with broad a reset we're but that extensions have to business floors higher. don't attempting success, on. sort with rights We're doing we're So rolling billion a reset a a every negotiating floors loans new customer. fair And of putting lower

the because, is said why this better every average, every a gets story we on on scenario month, So net reset longer floors time, is the for our higher we've portfolio, interest higher. better margin have for which

we Fed even they reset. doesn't September, got reset. another the floors July, really And another until If because months if that's of we've get better for so good until post of that's waited because X rates us months X floors cut March,

typically will duration the those for X-year they're they'll duration. loans the and of hold loans, on hold extension Those for any loans and floors

mid loan minimum an loans, that interest features refinance a So construction and get these money. minimum got moving we've suddenly is interest The we've because typically floor -- going somebody and construction there. complexity the X% them got to and we so other will cost that have not fact in they of typically on and it loan to X can the and keep protection tend

hold expanding of us those an and NIM So in they're to will important going floors hopefully part XXXX. be

Manan Gosalia

That's very helpful.

the -- the interest your like rates sounds it more look. than current forward So matter

couple going months? gone just the rate So not over I guess down floors the outlook the last because down are of has

George Gleason

more curve we're we that get on pushing if negotiate think rate know possible. a down, retain a to, some forward back outlook is environment, an outlook important harder risk-adjusted return the rate in floor. a on the gives part cases, that is as of much to in that so us rate our is floor very our fact as we going business, push and And appropriate hard the can't floor -- down, The there. But we of just not we're the causing that's is negotiation sponsors dynamic

origination really floors, it's So of we're a negotiating very team in and business pressed our that hard model, and important with very that very it. on our understands on those and them. is We've dialed part point

outcome So us. they're those of doing a really an managing negotiations better good acceptable for or to job

Manan Gosalia

then very a it. on Got helpful. ratio. I XX.X% high That's you have CETX And capital, know

what the the at forward environment, environment of some the is? what do sheet want growth balance XXXX, only looking you to given think should what balance about put extra Or mentioned loans until the an flex eventually also in capital we changes? Is through you You're on growth buffer as you buybacks? how we the the keep loan think uncertainties is. the sheet and But about

George Gleason

take do Tim, to want you that?

Tim Hicks

Yes. levels I mean, said, we've now. got strong capital really as you

as capital levels basis seen growth I of we've you've The stabilize substantial feel well. quarter, risk-based levels. been good our those we We this within think we are last retention growth current the at year, quarters even during we'll had have this good with X think quarters. like points really XX I earnings where

slightly ratios have capital give or for So now feel like this where staying or relatively, take, we'll are risk-based above. we year

so for for that purpose our in year And kind do moderates and the our year, growth capital on be. we ways to a this going few bank and at we get a of the an pull a But as lever current that's we well. know reauthorization But need certainly from If If our see to is in if finding growing share it can levels, lever a focus we're focus there where repurchase. is that can are we can is that that. certain on years. where depressed, also growth pull and share our to look now, right from price that repurchases, always moving option,

Operator

Truist. of King question line Our from the next Brandon of comes

Brandon King

you sponsor run to having think follow-up when So on is there projects concern land able a they being credit. about their that such give broadly base your Chicago with some you just a that more strong and Being when the issues customer does sponsor capitalization, support issues? into

George Gleason

Brannon, pause. can But upon of invest doesn't is, if sponsors a pref really internally also that a come that's then huge sheet. balance their and me from dependent or give I or of their own equity lot partners And it as into X a no, that question. their themselves different comes are you I couple think sheet a is flavors, divide answering have yes but equity. groups. them balance or co-joining more. was Sponsors transactions, kind either own One pref in good as sponsors capital, who of in give the answer that I you common no, And equity, their sponsors equity is would money

track have in lot while transactions, of done The big parties. equity case, of mostly of a have transactions deploys a sponsor, third tremendous lot record, they this and a

the recapping So of partners deal. equity out to those variety their partners they're a vision into plan their explaining a to the for when entice equity deal, deal and potential they're

mentioned, And as a it's high-cost environment risk equity high these to for the the because a Brannon challenging environment, slow. environment, that in going is a transactions rate economy it's

equity they're it. that and a up done likes who equity. with And that sense. an got match challenging to are story makes it. good doing So They've to the project thing accustomed investor at guys working all They've it's good a these story, They're raise that. that just They on it. got to for

it portfolio. me pause our So give doesn't any about

on asset this equity the putting There making to knowledgeable we other are there very quarter thing unique skilled, out see experienced, that together new are that it's on. that very are are think projects sponsors of they're projects I that their that trouble having every working this. a sense lot

a to gone due a up project have construction that environment Listen, project for delivering equity. of have Cost up. gone tough it during is carry inflation, interest to rates

the COVID delays had You've impacts. the all and

sponsors. the challenges It our metrics our sponsors that focus a had limited asset demand on And to reason are have economy. from sponsors, because great been a that we got so and benign good the our quality of of regular You've and environment relatively tough our that a is pain and the on new on handful that pain we transactions are because that construction. fact see in projects side that we've great the for about of hear concerns is portfolio shifts basis. The

have a designed So in well advantage older they're versus not the market that's or located state-of-the-art product that quality projects or built. well as well

we're to fact that sure fact that we structure are the stack value, tremendous very their appraised to at in of to amount our of position. XX% makes XX% to who these people give transactions money low carefully, transactions ever, that And at than leverage protect and XX% and us XX%, front of that position inferior our and extreme these incentive and portfolio capital have a in risk cost the to us the them more protect of around the of

on constructed portfolio equity you this of it's very, is guys. So the built the very could the really way about challenging where we for kind environment probably get this best

Brandon King

then maybe dynamics projects? my from regards finding you helpful it. lending. other more seeing very are How has only And the competing market? would yourself lender in that That's next you to Are appetite be question regards competitive in lenders Or to as maybe the still in trended Got lately? color. certain for

George Gleason

people it is years than and all there, the and were competition sophistication ago and X commercial and or gone. The out in more years in all is expertise, guys X from there's ago, when to -- when number the it's out it challenging sure. it run estate competition for requires there of who space significantly and the are lower real easy Well, visitors, was those people the financing provide fashionable but it's more

people are are much asset the today to and committed pretty commercial understand So class. out there an that estate it lending real as

massively And remarks. folks, Brannon volumes an and to the that's that I environment I smaller it why where we're his in alluded think generating than tell even among in we're good was is the leader as you, would earlier pie of group

disciplined. because to us don't them. been sense to single sense. XX CEO, make successful. we money to make do something we've just never do to that things offer year, make in do competitive mantra. going we're that We're as we let lost doesn't don't And in pretty us not my a years things our going when do We're we've That's someone why a else That's always that So drive sense. from

XX is in days. competition or say out So I though. there last changed it's the there, XXX wouldn't much

Operator

Martin comes Our of of Brian from next question line the Janney.

Brian Martin

just today. to, are lines as here if involves looking Just and here. about looks this seeing or talked new of where one that you into there as commentary add kind potentially look just new kind on on about kind as where to of segments goes, things -- curious 'XX can wondering just to on add hiring of George, handoff you're opportunities of you far talk see question, you or as with you give And know business some opportunities to position Just business hiring. do kind any business hiring RESG you the I that just opportunities line? if existing

George Gleason

yes is to I answer The yes, and that think. Yes. yes,

our this accelerator alluded our our quarters I we industry. commodity a I And trying in as and the this I on trying to, are economy certainly, and talent. talent year a of ago are, upgrade think and, really it supply short years have been is trying the really to for in couple We hit was call, think last or end quality so, the on of

a the upgrade was a person we're We're vacant, talent. than have trying trying better to continuously to position left. position we that fill become that person that when with So

prior we've loans, we on year deposits And alluded last obviously, we're high grew adding documents, XX% obviously, management as else. everything I comment in to talent. and mean,

of growth that people. adding without kind achieve You can't

to continue grow. expect We to

continually to talent continue adding talent And left. expect that we expect as We upgrade to importantly, to or we're most add has replacing talent talent.

pressure on So expense new keep our that the upward salary because AICPA will rules. an applicable line guide of

has Some investments. tax in tax expense moved 'XX going line credit sort the of noninterest of our on to and those forward

salary probably talent our adding to continued X%, X% is a constantly benefits and to digits, good will show growth single support of of to quality low talent. year-over-year our is So growth some what guided. the sort that But X%, expense improve to think, going we've X% we're because noninterest show our of I line we're trying X%, growth the rate, and

I losses team the in best, excellent in, higher lower our returns a great is year if of credit got one out. industry and industry than that's we've have unique it we think competitive the our advantage. model far best, the by mean business year and that I not averages generates

So talent. working the is confident key our are advantage. to model competitive our in our the And business our people very business But we're model.

Brian Martin

you. Got

a little to kind And talked reserve just over bit further I comments Is helpful. build versus done. charge-offs how on it Okay. that about commentary you maybe No, -- know 'XX. your is back, in heavy even about management that's going sounds the about the think like of is months then -- credit? lifting last or the the given that mentioned you've up XX it being in 'XX of

on Just in you're about kind trying a lot rearview how looking is world today? of build, reserve of the the that the mirror to aggressive if based understand

George Gleason

reserve I way. reserve earlier, build, economy, world in is depend the that have said and an If can ugly the economy could crash lot going if more economy. the crashes to build, industry more and events the a on Fed then Washington events as have somehow whole Well, the we

the to year But soft are if sort the to know the build, to the year. to increasingly, we're our benign on. us selection that reserve to conservative more our the will landing room relatively next I we in give the of tell. that shift beginning case, that over prospects likely, expense course would is time set our of and used more economic scenarios can and some -- think migrate build assumptions provision of or fairly a the reserve, come for camp as benign down getting But goes of given We'll of we've

there'll quite get want obviously, Those be play to and for about bit. more Tim me the going we're prospects I reserve We've that caution, caution to again, would a if And of you, better, And economy grow. events to would worse have instead out. that needed. talked got builds

dollar ACL to growth. going our to our we're have volume So increase for of

Brian Martin

you. Got understood. That's

just Okay. was, of a next with more still the here for it weakness you've one sounds couple quarters, the the And bit though on margin, last the you've got little funding got as catching me up and then costs loans.

does early under on of I then on cut, deposits and and though rates is as start pressure repricing, the a maybe bit the floor to the outlook mean You're kicking bit how in bottoms I maybe guess. seem second the on margin general stabilizes lower up kind of is 'XX, a little think the to midyear just or it's picture in level? kind specifics half without giving or the as about of in big and then actual

George Gleason

the we cost those enough floors as in really we floors more loans. of set kick get of that in deposits our faster floors have a at a loan could and active that is in our our lock in would 'XX is need cuts get for in and planning rates we Brian, floors could we're to make those and loan magnitude and those that than 'XX level, scenario, working that falling in rate to And environment, those of rates good rate our because important. drop Our

effectively what And rates even the for get spread and in to us yields loan and costs then nice dramatically. set like NIM to second of rates, cutting to and trying start rates being in us adjusted That and inning enough these would slowly. reverse core inning portfolio when the favorable been floors in and deposit cutting cut could kind of more. then floor we in 'XX we've the our or experience ourselves able if XXXX, that quickly our deposit position NIM see We down give 'XX, getting Fed 'XX, had of spread in we have rates our costs can in get by third a scenario get that's the the of then they those another -- or more adjusted our when really Fed

X time for we increasing of side planning started flip variables scenario, that going direction. Fed the the we've scenario but in started rates, working quarters other that that A of scenario on From been the lot that now. for

Operator

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

Michael Rose

Just follow-up ones. X

are I was little It and the Just What puts good a than, lower anticipating, the outlook. bit obviously was takes of I on that? think see. and expense to

see made to what having where guys wanted costs? growing offsets are you and Just some to investments are

Tim Hicks

We management be best you tried Page in to to would our would the point offsets of comments. outlining I do what Michael, there. XX

our a to additional ago, expect we just continue we're to do as As increase to, continue staff salary expense alluded George to to hiring support growth. while

offset renewable biggest that low-income expense to tax recategorization the energy credits is our of and housing tax our the amortization Probably on that credits.

'XX are transfers that into tax We million was a accounting what line. expense X new of effective last the really adopting year $XX standard January

So that's of offset. an kind

And eliminated special not assessment, XXXX. we one of FDIC course, they the of fully of 'XX. our expecting And those amortization in in intangibles because became amortized

are those benefits. and offsets other increasing otherwise categories, the in So in primarily salary the growth to our

Michael Rose

accounting just even for appreciate of -- excluding that. was but was bit changes. expecting a the I normalize than some I I I all change, meant better think little those appreciate Yes. still it excluding you I it. even that, if was guys I It explaining

for of -- the we there. from quarter, So you expect help some initiative. some that mortgage starting just any know -- demand thoughts hopefully guys as The we couple years, love on disperse initiative next and this think that the on mortgage X front? rates would but last about was I what question maybe I had would lower just the what And it's new

George Gleason

to in a applications in to to or maybe we loans to in And take going probably a March. taking February originating take intentional -- handful very -- close we're of do expect Yes, that. continue approach hope to March, start late

We one or second in month market, probably market. a it later will going X in a get get it going

lot markets our with footprint. serve branch Of course, we of different a

expand to roll So and it XXXX. out, through year-end and out throughout we'll it roll QX XXXX continue will of

EPS months will net we'll I drag up think X month or be unit. the originating, be X XXXX we'll probably and one running months we get or added footprint X to start and pretty some cover and covered because going -- most and have having income on modest a by revenue, later, XXXX. much we get It in of unit they'll we're will another

part during the talking stay of the or much at impact $X.XX that of of $X.XX most. We're the immaterial the ahead pretty will the So expenses revenue build-out for probably an early phase. year

in of where And this full begins a XXXX net we turn then hope full that as done. and positive, actually income thing XXXX it's positive have to that, neutral maybe for would we income year get net the we build-out EPS impact the of

doing in the a going be paragraph So it after XXXX fully and it deal important probably net rolled why is a that's management fully But is while. for we've customers, out. it last to not comments. our reason got got It's I matured the income the EPS, and income, becomes to of to much That's important and big the it. we're pretty where mix

sending customer to of lot a have direction business and is experience. request different our good to continue for We long-term that not customer

a this initiative. customer-driven So is

Michael Rose

Totally get it.

Operator

Our line of from next the comes Preston of Brody question UBS.

Broderick Preston

quick, I just real CETX. to ask want George, on

this not the fact you I you're probably it trends rebuild actually to year, can back see year see could was and just unfunded given growth still given going the think to and levels? buy strong you stock, CETX slower profitability buying reverse than you past again start the do and this back course commitment just that be stock is but don't If

George Gleason

Tim?

Tim Hicks

be growth. year. like XXXX then on will can where really on here. depend this after feel we And dependent slightly from it maintain it will it yes, Brody, or we improve Certainly, growth goes in

Broderick Preston

wanted fourth kind I backwards a your widespread last it. depending 'XX bit Got If or of maybe that from quarters. on time circle way for biggest Those quarter the to back the origination going and environment, that, I kind of a fourth quarters to at span. then work X-quarter something kind originations. quarter my the competitive you, take floors. quarter, like several 'XX spread were slightly George, to look And the I of just to little commentary back less

was of that. low for LIBOR Fed funds, bit a decently

so wouldn't of for kind low that accurate? fourth the And necessarily that, the like kind of range. to quarter into the Is most maybe so, anywhere the rates an comes XXXX, mean description? that if much I the to of past accurate as if from Xs forward for that, the matter floors X%-ish year floor And in mid-Xs is and that back 'XX, that is are would curve in

George Gleason

XQ to will the you look I floors in that floors and correct obviously, Well, XXXX. floor. that the think vintage of XXXX of higher the But higher loans were origination you've got rates we of we determine XXXX matter XQ started before much at to than been to floors of are never got for rates. the And We've the in that interest of Fed negotiate increasing than got the were XXXX loan. rate the floor start the contractual able

But at rate, start I said So getting vast floors and loans. the of -- in most higher rate XXXX, the not it start XXXX, part of the a of majority on rate. we at as were and first earlier, was the

the I a on with look disclosure. information we'll portfolio that at that quarterly request correct. that point comments that in in earlier, you're shows the but put our probably So future work honoring again, And the provide today, like to we'll what floor next have me time. chart the rates in management don't

Broderick Preston

I'm up? those point of come the of X%-ish starts start pass to my correct Is course of rates if fund reverse just there to that X% where, specifically originated the if just actually could stuff Maybe it. the extend I in nature this to are the curve though, XXXX the floor as fund kind the if you up, a Because to more by commitment could kind into XXXX does to and inflect thought loan XXXX process. Got yield in in range. George, forward starting

George Gleason

XXXX to is XXXX very going predict in predict. Again, is what and the going Fed they're and to hard do XXXX be to hard where is to in

trying not develop So information own to that we go and because the I'm comfortable going thesis with you give on on to your let I'm based number. provided, you that

Broderick Preston

of giving you mind RV, those non-res'd on origination me the kind yields kind ABL, the the stuff, loans currently? for Do what's insights some Understood. of all loans, that

George Gleason

is gosh! Oh, or And ABL a leverage total the dependent it's land. loans ABL availability, of utilization dependent. have -- very the most the matrix that world, of the the spread upon In

hard their numbers. that leverage dependent and utilization tranches because and specific, there may comment those loans deal spread, on is be position typically, borrowing they're total So X those upon spread, it's to available of X in of so X of tranches or

on. So those to are comment hard

The and the indirect of stuff forth. dependent fixed loans rate is, the again, upon in score credit so world. are lending indirect borrower Those all

-- would X you around probably or know? I, guessing am Jay, I that. not don't we're plus on I'm So guess, actually, minus, do know, on I that.

Jay Staley

feels That yes. directionally correct,

George Gleason

Yes. Yes.

-- those fixed So loans. are and rate

newly millions that of and dollars lower we're month, off millions current every market loans rolling on rate originated of at loans rolling of rate portfolio. of So dollars in

So that's helping incrementally margin. improve our

all on rate. And fixed much the same phenomenon which going in our pretty securities portfolio, is

we it's we going either higher to if XXXX. replace not yield be billion portfolio of it, about that that, what's out. we'll do in suspect expect replace We would off substantially And or roll $X rolling than to

earning So of those elements that rate loans or of it's help fixed a assets, the us will securities or loan some other indirect more favorable off book are book pricing. components fixed reprice rate our rolling and whether securities at

Broderick Preston

last Got on couple and the it. I one on margin just credit. one got a then more

the get curve, cuts change like but the the is and what you outlook, or So commentary the baking XXXX? we X cuts rates, NII think trajectory did tie tick X forward understand you that deposit and X that you're cuts just commentary your into then say NII earlier around if I for of that all I George, gave, guess how would X I the --

George Gleason

cuts in Well, more or don't our like set floors for have loans certainly as to for in we a declining because 'XX, portfolio challenging scenario a X we in would our X broadly bake us, that's we if set in the environment. rate us have

be 'XX. So NIM that would a for challenging scenario more

Broderick Preston

ones out loan in sale of on I is -- is on And close had that The then last the X eventual and that to buyer? on loss. I you to that don't a March, planning by to of of think you sale take property you XX you the release the said the current planning plan credit. OREO just all expect the called Are Okay. financing the

George Gleason

that? to want Brannon, do you comment on

Paschall Hamblen

to Sure, Yes, we not We in think our sure. expect confidentiality result guys loss. in for that correctly. a transaction. And transaction the the you are do in comments that told the I we you we read around of sale under agreement past a got terms forward, that's -- going

of So we without we've to everything that in tried transaction. with you can breach share being

it George, our you under is safe So beyond share. know, if else But that, feel I confidentiality agreement. anything don't there's to

sponsor of normal Everything that, diligence attached move would is are in conditions terms to and like to the diligence. transaction all moving be the that but their due forward in They forward closing sponsor's due continues diligence a there. due

So ago, the as still happen we year. we sale a expect XX quarter guided this to March inside of

Broderick Preston

Got it.

Chicago last just land on my one then And loan. Okay. that was

for look they said, would of out sale land the kind OREO I guys process? loan into or they a it's there that that a months and you this think maybe same to make then try with kind of that of the one less would reserve take paying other the or would decided a to end that loan they're George, doesn't of L.A. was have maybe as interest they similar pay At handful for go you interest have of, the With reserve. if sense that, it way where this anymore, moment that

George Gleason

Again, sponsor would similar be yes, presuming you're then there I a -- scenario. they're the sub-position done, gives up it that would fairly would that and says is on assume

Operator

line next of Braziler Timur Our Wells comes the of question from Fargo.

Timur Braziler

that XXXX the vintages the $XX commitments of yet RESG, billion billion the what for in $XX to XXXX portion has in question. Of remaining fund and Thanks from up?

George Gleason

the here, If Brannon, chart cadence you at look Tim.

Tim Hicks

Page XX.

Paschall Hamblen

XX. It's page

George Gleason

Yes.

is is I'm the and no, there -- That 'XX, -- So billion 'XX, $XX.XX there's the there's billion. $X.XX sorry.

Brannon, this, Jay, You answer answer have to this. or subtract.

Paschall Hamblen

George It out the by Well, graph we've yes, focused what year remains. on vintages. unfunded hasn't been is of that don't origination. disclosed those Jay, of repaid think I --

number. that have we believe don't I So

Jay Staley

No, that's okay.

George Gleason

apologies, the My you to chart. took wrong I

Timur Braziler

But loans much No, fund it to months XX kind fair prior going 'XX. the assessment? that the to XX XXXX in funding like originations for up here of to using up, of these good. are Is of just comments sounds all be

George Gleason

Yes. Very fair.

Timur Braziler

at in mix fundings to Okay. you're a maybe deposits so then noninterest-bearing again. the the 'XX, leaning the assuming be I'm deposits. continued looking are time expected going little into And of shift deposit time funding, on out side, strong

guys concentration for up time maybe base you see now with time, the could deposits And being Just of XX% that are we to? there where deposit are trend that limits internal concentration monitoring?

George Gleason

a concentration non-time. time, have variety not deposits, on on We limits but there's limit a of

seen alternative we're originate not CD to of much and Obviously, as and can high, and rise, the checking yields. at checking rates as higher accounts accounts, money if that working savings it money industry. hard every lot account being in phenomenon. being And problem. number So to much a that business with investment continues rates rates put across have areas, of that's industry market excess to higher obviously, the liquidity we customers savings account, high other The out their the their a has of market drained work entire day

on to numbers work and new hard to holders But add every of we'll that continue effort. account month, continuing we're large

that. So the continue as as sheet, more of a time But total. deposits will be somewhat have we in to the dependent really good feel we good balance percent upon growth we about

Timur Braziler

The Understood. move those just then in the ones quick you loans? plus that on credit. X LTVs, XX-point provide reappraisals And X for the had can X geography

George Gleason

Brannon, do have that? you

Paschall Hamblen

actually I do. Yes,

the So in the Northwest, the another a couple CBSA, Seattle was of those and were in geography. Minneapolis in

Timur Braziler

only unfunded while a the allowance points, why dynamic up component? translating funded allowance basis talk X through can higher the isn't the that to XX directly unfunded on balance guess points. to basis up Okay. unfunded for as higher funded allowance have look allowance gap I versus throughout the year just at the to with seems loans the we of if course then for loans, allowance funded for And lastly, guess widened maybe I you

Tim Hicks

mix. really about just it's Timur, Yes, the

being mix models a Our to a depends is towards balance obviously, run it is the The unfunded mix higher it's others. through. balance And higher that just funded RESG. on

but unfunded makeup in of I the well. of a pass a those rated factors of obviously, mix there's is component is lot it. So the the into everything that unfunded in of credit go as And it, mean, the certainly

ratings obviously some funded typically you balance. other have So in the

Timur Braziler

Thank Great. you for that color.

Operator

Gleason conference now turn Thank you. I like to would closing remarks. for back to Sir? George the

George Gleason

you, We much. a about Have call. today a our days. call Thank great questions. XX day. Thanks see right. concludes appreciate you all guys. and we'll in appreciate quarter, great so the the That joining and Have All you

Operator

participating. you thank gentlemen, and for Ladies

may now disconnect. You

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