Bank OZK (OZK) 18 Apr 242024 Q1 Earnings call transcript

Company Profile

Participants

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

Call transcript

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Operator

Good day, and thank you for standing by. Welcome to the Bank OZK First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is recorded.

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

Jay Staley

morning. Good Director and Staley, Bank Development Investor OZK. of Jay 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 questions are President; Joining Hicks, Chairman the me Officer; Officer. your George Gleason, Chief CEO; Tim on Operating Hamblen, Brannon Cindy Chief Financial Wolfe,

let now will your the We questions. lines for

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

Operator

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

Stephen Scouten

I that the and loan NIM. protect magnitude in to the the here potential continue time. of this magnitude but be happen benefit of addition that I loans? for the quarterly the of on around up sensitivity how talked XX add floors I'm kind showing wondering lot any if quarter guys mean Great I'm that of -- the helps higher there's moving you Appreciate environment comments new to longer frame and help have in really appreciate done to management if you up sort as frame basis you change the or yearly of that, forward? way curious a of a could we again. kind there about Figure a

George Gleason

that rate so provide those large information because we anything runs don't we of on that, run certainly forth. to Stephen, in disclose our that we but ALCO disclose various and we runs that, regular scenarios don't management, numbers and do

to time us. a it for to of good keeps interest is us management from on also perspective. position for us management for hard an excellent income higher fairly at level, about So you, longer is in very repayments scenario also we we Obviously, feel And said we a of muted the borrowers. -- tell there. net comments, It our said at our both higher in comments as current longer as I floor. very helpful reset we which are gives some that would feel rates Obviously,

So far any scenario we rate than net in by interest flat believe costs income the additional incremental earn. we credit are more that that outweighed

a will for pleased So reset a we cutting for view we've rates opportunities higher that that expectations bit. a when scenario floors. as little that are reduced had more view that a as longer. we date seem us to for positive net We getting later at be Obviously, constructive to be

Fed where And they year out. come expense our be but interest we of would if tail they margin, models that into rates. stay roll just incremental risk late our So provision play, higher the would cut assume that cut probably would into if be that would are, next rates move by higher net rates the and obviously, the very offset beneficial benefit for

you. to helpful that's hopefully, So

Stephen Scouten

play might dynamics to you the to on or And the various of lower credit the end really but granted, there? intentional if helpful. spectrum, curious at be million, share $XXX function the this I'm showed the of you been credit those Figure -- the smaller, where kind I'm couple tranches more for looking that's XX as anyways. the lower last from especially lion's credits quarter, have guys in RESG. at which very is that's within at of move It like seems $X size coming slightly of largely focus of in that granular quarters, It so more of an kind additions the of market what But

George Gleason

business together of equity piece that may in to smaller. not deal larger some for good in is closing the we're put any I to we for that's finding loans opportunities make hence, fact a that is probably the size. just transactions of pipe that more leaning of it sponsors get the makes a some the or open little there And than from that deals equity. reflection smaller seeing have through And a But time. a And past. toward reflection may probably are today. any seeing the the requests yes, still in just economy to are what sense of point think We're sense the the what we're And at to sizes sponsors percolating

Stephen Scouten

it. Got it. Got

to Okay. And do the then office. in? you projects. headlines seeing loan great just pretty a and from in the financial distressed maybe products have supply the And a step step or able capital you crisis, negative But newness obviously, one, for Are your reason, were if where capital guys perspective, of insulated, mezz whatever issues, some are the overall on terms system? if lot strength other to in dynamics were a lastly guys to perspective, around did you willingness what to able we're in for and to me, seeing of speak well a providers overall I wondering in loan-to-cost similar sponsors of like seeing and you mean, from could I'm optics you're

George Gleason

you better view Brannon, do. to a want on shot? that Brannon do than a I take have may

Paschall Hamblen

new coming new product that's -- portfolio, such new there's to kind for property a going capital be the the brand it's a XXXX deals fewer our Sure. up, number older will narrowly returns material that's just flows Sure. that constructed product most existing vintage, Well, are your as harder the more but be product there market. you across office is on advantage equity the going hit X our well. and of Stephen, I lot proposition, in on as types, case the of much in mean or that vintage But of obviously true behind portfolio. a question for the there what's data vintage strong side last would has it, and years focused is the of and fewer projects later on a whether focused call over the

of quality portfolio. going likelihood had existing has that does the see support materially a over to on case. the that product that in year the enhance number an of you're where So a capital We've last product the the situations been

developed to financial significantly will see improves our ability the where we'll XX, and think supported. be focus and the comes I be and [indiscernible] and newly are on likelihood to going that quality months with next best-in-class additional wherewithal over XX situations the case. down experience All sponsorship that projects the those

data gathering been an call in capital word from carries enter it's And that meaning. case. the outside are what or that world. yes, from So Obviously, the People broad we'll opportunity the gathering space to of distressed deals. a

deals Of course, equity. points in we've providers than lower got a our the at lot attachment great of capital

to there likely being raised So there's more but distress. for defend, capital that out

equity think I the distressed I That's the -- George think deals, the case deals. to up in new pull on and of brought the office residence trigger. even on

situation, that. of discovery call as see enter ultimately hasn't marketplace are price to some materially gain transactions still It momentum there's starting transactions You're to will, a I it capital the if there that start developed, rescue more in that and coming think, want off. but you to

of opportunity, of flow lowest investments. the buy opportunities creates standpoint in lot result a that great long-term see most you'll There's from the think capital way. the hanging fruit great uncertainty that I So

that be So develop of in I think I that see it months. lot will we'll to think of XX next XX more product. newer a the over again, But vintage

Operator

next with question from KBW. Mealor Our comes Catherine

Catherine Mealor

a little that see quarters? of how short-term extensions? longer that I past bit on just want higher the extension to portfolio I extensions do get that sheet? ask for last kind bit scenario, could what's seen for for and of just to of of as continuing maybe we And quarter any you're a the we or kind quantify some there we what about that clients modification and few a In kind be talked rates to of way cut. could -- know your to of trend to if you've the wait size over balance continues that color your gut take your size is on little

George Gleason

data. a in we would But fingertips, Catherine, I you, my haven't it. and that business I it as it's usual we don't have all sort tell disclosed have situation. of

extensions, I our think that improving commented maintaining on the we last typically are economics we us. for quarter the or probably transactions

would that so appropriate getting what extension Our typically contributions and in cases. reserves fees they to and those bright stack, replenish majority the we're other to a extensions higher, trying normally forth improved of be most vast floors cap and reset in are getting done [indiscernible] as or

all have us have that yet would not economics TDR. So world in been improved These a the we extension as have old flat have been for done extended. these to any

uncertainties there's quite some think constructive very [indiscernible] not to to for a as until to we've the time, the a the in that of but expect by better large, them the vast projects get be sponsors interest majority the place them, support comments extensions. all we said rates vast So certainly our conditions our seeing and sponsors, and economic of of we're step up that resolve majority and and their management case, or value and we continues in and

Catherine Mealor

a new in think to rate? there a like could. Right. if is margin, -- be might still on coming in the quantify cost growth It kind feels peak to question you've a added we of about maybe got the And quarter? that of deposits were this how or I And incremental what you of then Can CDs. way any close lot deposit

we gap that peak peak to peers. thought curious your maybe later might of a deposit there's as that few close so than rates? to are just closing how we And some quarters your deposit cost But get a

George Gleason

that would That QX in it deposits a year than QX. that rates was beginning fact to we of And get led Well, is has the pricing. cost I that to deposit was tell reflected in it there deposits halfway January our probably expectation in at of from were where what cut incremental of our about the to QX. the cost recoiled were Yes. on high in incremental cut, that's you a in saw going and where less

have was -- the in new CDs to issuance but in repricing is on stabilized it January. here. on run low It as than still lower run QX rate as not you're seems So the rate in that

the X portfolio, some a we've said, our now, in just that would think of increase. duration. predominantly last longest have that in quarters because at months maturities CD Fed continued XX And after I in quarters the the pricing for escalation several for rich we're gosh, portfolio, rollout, we And

management down lower rates comments from is of CDs those decreasing rates. more our change, couple getting increase. we've that we we're of be are over a to where quarters rolling of rate at to where said So higher rate got as going in But

Operator

Matt question with next comes Our Olney from Stephens.

Matt Olney

paid and rates? seeing that references be the RESG makes a management loans eligible to for RESG have not best The Figure for probably are various at and that higher commentary that just appreciate lower assuming are or about looking repayments, now just and XXXX just sense. eligible to reasons, awaiting level that been but loans to the to levels down. currently have XXXX lower think higher way in Is eventually. at XX rates and could just vintage that, earlier the see We're and those I'm rates expectations yet obviously of trying looking currently repaid, XXXX, and of RESG we

George Gleason

key indicator probably think, there. I is the obviously, age

to way that's at reasonable So a probably it, pretty look Matt.

Matt Olney

see then diversification were few the over some paydowns years. for And few mentions do commentary there those the management years RESG, we in increased next in the next about Okay. if that

but think feedback I term? I they about curious loan guess within of RESG now mix is nonpurchased I investors dominant I'm be in do best that hear shouldn't XX% that think longer a more bank. business the part of niche, in believe And it's terms the is the of the from you strategically, So loans. such just a believe RESG how is that

bank? overall in terms will of term, of how it RESG a big curious portion be view of So how strategically, the longer you

George Gleason

Yes. agree RESG the that with are from who many that we would quoting the investors times that We've said in the statement best is business.

Group built a excellent a and we've fabulous below-average with model think I Specialties great team have generates Estate risk. Real business returns that at

stringent been that we're to big on adhering So times it our as and and many RESG in its servicing portfolio. its as credit let has principle while maintaining discipline plan be, our that can is is going get quality and to strategic communicated quality

in not talked as about business regard and We thus to as agree are company diversification in if worth more our quite we diversification business document growth more lines of this that a model, for We diversified quite talk is the and and think other strategy. a have good valuable very risk-adjusted as RESG a growth, that even more important, is returns. while

RESG as grow. let being growth as much first grow The naturally it will

The think we'll lines broadly more next more second a growth being I time. in year, other really impact business That and but year in and of happen significant not may quickly see grow over XXXX. this that

stated privately XX% grow that And to gets bigger, our business, continue say, see RESG and I but of or augmentations XX%, group even of like grow in to finance I've we've group, business. I the to as to and named it's indirect last XX% and more commercial capital over less months fund is to few grow And those think I and groups group wanted or solutions institutional by other and created now, newly and I but finance our it a our together to it lending, of that talent our banking would get adding down team. to lot XX% the our rolling that asset-based our lending, our equipment

I see think significant CIB. out of we'll growth

added our has out Jessup's months. in Banking think see growth implications. recent team some capabilities community We've of of under realigned real are commercial I Community group, realign in leadership we'll reporting people that take quite some that the up all And a now I some that reporting carrying of positive banking. We commercial part structures team And banking few and have advantage stepped weeks that to significant of a of members bigger Alan think banking, and role the leadership. structures. of

but with bank market We're our are HELOCs just through team course, business. yesterday. of consumer big efforts and We our the loans, also taking sell of mortgage we'll ramping that started Cindy banking banking part up new important our of the consumer an secondary that. flows applications a these branches franchise, Wolfe's part just started, retail it's growing We loan mortgage

we're headed things parts or process it's that to there, that RESG, on ultimately grow a lot going equal get a to other of and but they be So focused help way. get exceed of where we're to those business will our where multiyear collectively

Operator

Raymond Our next question comes with from Michael Rose James.

Michael Rose

step this in expenses growth I the kind outlook. Nice of down reiterated you quarter. mid-single-digit know

we of just that run additions for guys such. maybe the get mentioned opportunistic You a rate as hiring, you move expectations should you things opportunistic sense what year? expect opportunity be? you'll to the through size we that the of Can and are for for I'm impact and how to cadence how the just trying

George Gleason

We're shut and going be I last hired X think this the And to quarter, been. divisions. be down surprise There's real minus and adding going have better And over banks management in through out data a back, to new lot opportunistic a new XX-something of in a of see people. net adding net members. somewhere have teams quarters, last all acquired, or people. experienced those comment gave team lot entire there to and we A value we at people talent very plus XXX XXX have Tim, XX quarter pulled of between people. already lot me banks forward. us see Wouldn't we and

if run, people, is believe world great culture, continue essential. placed AI some any, hard income, talent time do and I believe to quarters. knowing talked much, firms. and this from who that think to We've we'll a produce team-oriented our increase fit our In on we a we net that, making it's from people and capability, and or successful X add revenue hiring very in high comment because work to aptitude intellect, quarters technology be And even that the they going ability high high on But won't X more about emphasis losers call, the always are it great EPS having number where the of we is a winners some ago short highly that and talent. to going more will people of to successful the separate and best mute and for less current

continue on and very sale just be lot now. for we to there's right of talent a focused So talent,

Michael Rose

Or be across the of be and to community of going are the it additions going personnel? the lending more branch is George, So some lines? focused to kind on business type

George Gleason

It's really the across all business lines.

lot the banking mentioned, that finance of this the asset-based kind we're as new a calling of to group that institutional and As aligns profitability finance, in, experience our credit a foundation of have of and corporate that with shared lot other we're talent capital of for from bigger we're and banks, group have now group including leadership I under building fund Brannon a is and quality that that top the a lending, banks combination us. equipment commitment solution what bringing at

begun there. We've and to business the more add bankers adding side. the We're of in we're a adding So lot staff retail team. retail branches on more

We had team a that. Cindy to continue need going generating really just deposit branch doing develop ended, the growth nice did infrastructure going her do quarter an existing future We're to number our $X in excellent of to But be and quarter we're that, generating in years. billion $X job to to and with billion growth deposit our we're in network.

and banks fact that very proud need safe, So to people. do and things cutting very year north added continue a to of lot to we've to very we're grow have of the And last when going grow of over forward. new people XXX close added we we profitable even though the in doing manner that staff, XXX, a been the I'm XX-something

to of franchise. speaks just significant sub-XX%, ended the in capabilities Our efficiency that generation ratio our the just quarter with and revenue

Michael Rose

have saw this be focused buybacks point. not out are whether it? guys don't just else growth kind stronger as be place bit the is interplay little the the like just in And That's a your does we I Anything deposit to where at efforts going general? are that It even just you think a doing we on forward. place just not stock use be thinking How have decision, that of should And given not growing then could be that you a why follow-up. if of buyback about not at a in you in RESG move as just the buyback maybe that sounds all as maybe or it tool, decision the others. I least terms businesses, trading, helpful. one with mentioned to Board's clearly in then

George Gleason

the is capital. of king Tim

Tim Hicks

yes, our Michael, how call, there really our efforts a comments our been and you saw XX this that's -- on focus, the growing I've really minutes of internal we're focused first primary around there. And about organically. lot talking just of

don't year. So our to continued buy we back plans any stock last this and for this have year expectation given growth year growth

So we use a a our when have no ask Board in place to there's time we'll ready, don't at it. reason any later have plans to buyback we're so if

Michael Rose

could January, Is ability in. the were strong a of more Totally If quarter? characterization? one in to grow a kind that rate confident would fair squeeze you just in I given just PPNR you're one a the back say get than George, first that it. this or maybe NII you at last EPS year record and

George Gleason

going lot we're of money, spend to about economy. there's some uncertainties Michael, the and a

net little in going wasn't we The XXXX. call XXXX. the be share grinding that be I a January would expect It record a year linear of a guarantee out think in deal, quarter. and quarter, it had net sure year a take we're XXXX's over full to a our with number. of not We're to will and of full about course, I'm at over huge EPS top up our of a QX gave coming the for I cautious would year started record. can't to income $X.XX and EPS we taking that. full record we income our good I would every EPS confident outlook love improvement, expected about year I was And But and a for numbers a we a improvement for about record be off year but income of net work this to XXXX, of put record guidance really bit XXXX So cautious every guidance in of number basically every guidance on to get And We view it, improvement QX. reiterate but record quarter XXXX, a we 'XX. we're

Operator

Stanley. comes question from next Morgan Our Manan Gosalia with

Manan Gosalia

new the loan disclosure appreciate floors. I the on

I for but mentioned you that think this, have Is environment. rate higher those should correct? migrating longer keep higher floors in a might

George Gleason

definitely. Yes,

Manan Gosalia

loans how you think do floors couple And move next about with capital these between higher Okay. floors the go loan the automatically exits then years, the of through we market dynamic have as in that some exit floors? that below wrong there go the into Or markets on than loans be I these the capital those their -- about remain when rates of way? rather am Would would floors? thinking

George Gleason

do answer Brannon, to Manan's want you question?

Paschall Hamblen

topic, all Well, Sure. They lower can. complex they're is go where a as interest are rates in to in at, And pay going rates and that. phase. project how where going they have influence love phase, borrowers are also, to it construction very look our the fast But they where is lease-up think to its go. its certainly, you it's to

their looking they yes, looking, low not have, simple they're are they to remember, would but world, considerations. real get. going in loan they're then would you have And a just if to proceeds also at be the hit with our that they but projects rate be there other and we fall at in to floor, the So paying the they cost

that. So involved multiple motivations in there are

portfolio. loan where rates to stage than sponsors a So for to But our fully happy interest to the the for more a loans there's cycle It's look, life of much a successful move repaid them. be that. to expect to are. We successful just we're our have construction sort next

part short, of in a involved. but are yes, there's rates So it, much more

George Gleason

stages it with mid for to construction more in construction. is not loans, impossible color in And move and some forth this. hard, little than can agree But on it me is it's Manan, or those weighing a disagree easier let states. that, because but give and of off so our Brannon other

to of moving the there's mid loan natural friction So construction. somewhat a

In life minimum we the before be interest of loan. of for addition And minimum off got they loans we've that a pay as pay X got us earn interest, the our over difference us that charge. paid -- a to that, requirements interest they've contain interest to amount to the if to

anyway. So they than books, ripe that of refinance minimum sort to have compelling that to would be the that they expect become more floor so. them we it's Those are rates. if are burned permanent the until to And susceptible interest the projects, tends above right to fully exit that keep on market permanent loans that refied, do advantageous loans even market their when to if go those loans loans that go minimum requirements, loans off being anyway to floors incredibly reason higher for met The unless has to to naturally sooner. which there's a that when completed market can, interest are an

that's a to either. us not So negative

Paschall Hamblen

our to Well, mentioned great loans, with on multiple that. the absolutely a floors, all doing they've was improving job the the also amount. a have about just minimum of right to interest add you're setting going the phenomenal job But I that, guys sort been we in and done that.

as it a well. amount, as loan piece percentage on they really of So of hard that work

leave was important That's I out. a one to bad really yes, that So function.

George Gleason

the of is not who is you But familiar our return designed of to XX% less. sure interest minimum be our capital or a project, of customers. typical cost allocation our those punitive more really designed with, loan that not the it's on to are the minimum because for to make achieve to we project And

we We're may to even XX we loan. of year or so before capital on commitment against have that funded. a commitment or fund hold XX% out amount required anything it's XX for that months full a And before months

want customer refinance rate we so the we've XX someone to fund, And refinance earned fees capital an have capital never they them decides leverage allocation fee if that but other to the to than a And some lower and months. on more origination huge a give will and the anything for never loan. allocated or could

So return the interest necessary to make the of and it on life loan we that equity is over of when sure minimum irregardless a achieve minimum prepays. calculated the

Manan Gosalia

That's What higher? about transactions starting answer little. sidelines. very fulsome just do there. you on Maybe distressed helpful. drives waiting up to I I you meaningfully private a of think a there's the really pivoting, know capital appreciate pick that the spoke lot

should some for it is is So a rates? on to on more? resolution fall them view? Or of this a those Or it just your uncertainty function meaningfully waiting in valuations what drive of transactions higher

George Gleason

transactions. but in Yes. market. other don't going me I'm make we to to transactions let our the question, we misunderstanding. -- Brannon Well, see let going are answer that Those create not we're There any that sure I'm distressed transactions talking are about

of a the U.S. view across huge have market the We

rescue our causes that some those what's that can precipitating event to with color that So to more to going But go clarification, work. the caveat be capital to transactions. Brannon, give and not are you of

Paschall Hamblen

sure. Yes,

clarification. great question, think, great I Manan, George,

outside world in portfolio. our identified are which are you of number broader of issues, a the about of all We But talking play.

that's that more into draw much more it greater to a a Cap I think them velocity where will those at active quickly of as start down space. relates market. rates level multifamily, sort reset, determining are buyers to

invest one distressed the billions to think to is many you're opportunity funds at for looking longer-term the opportunity start if in have raised of that office. dollars I the sort it from of

it pause out. of be much that selective relates some as product some they'll falls how to more waiting type. the But There's exactly to see

are into a of to that years next and of leases a over have out got couple where fall lot to in going of occupancies going mature You've are some the visibility lot those who's vintage vintage out been older going to even rate later leased but interest going The that who's figure product go. now or to issue trying have and to stay of up, to a up product out debt their brought quite or of the And are capital, just be that. that lot re-up able of not they you portfolio of product that institutions very clearly, type lever won't raised lot distressed that eager capital in there which there that it, and frankly, to they've to finding but out lever expand with to are there a holders type.

at office patient, been to have there. But a to They've rate period got it's going interest markets, of going go going turn you they're But forever, where don't going of the are see out bit is they've They're in play out apple All just to market rate to markets markets. lever lose can the a, So a velocity not of begins longer the over terms those They're freer little some it things at have interest to which they're going term. they the out seen more, either, and in out stay world that part -- it think at play in trying office how bites deals. just in they capital play money been who's figure certainty, there. be various things to or going help years. to again, part letting in capital who's to play basis to rates, part X increase. to into the

Operator

from Our Timur Fargo. Braziler with next comes question Wells

Timur Braziler

pricing brought higher-for-longer to you deposit It like in higher-for-longer was trends a able just that deposit half bring a sounds at environment. in some in Looking I January. guys the of know were here. with back environment down

next actually in such higher-for-longer do dynamics margin then at pace. forward? the quarters? kind here we at see net a a and couple margin linked pace pick we compressed into looking interest the the environment, quarter of up actually decelerating decelerating up end go that we of decline Or if bit at as a Can little compression can Just some of NIM the deposit there going

George Gleason

we if assuming don't of think happen environment near stay that deposits the tail think interest-bearing flat increases Fed materialize timing I and Fed a -- we the relatively I cost current risk rates, quarters at of a a rate in higher-for-longer X out. cuts the of couple to of term, get doesn't

Timur Braziler

down the Got maybe way Okay. And then for... it. on

George Gleason

of That $X deposits. we quarter assumes $X a billion continue growth in achieve to to billion

Timur Braziler

the fairly be that's do rates the think to down Okay. and the That to as there have then, some of to down, is to in longer something to time a have start on as And formulaic stay costs for reliance lower? elevated are more guess, you're I ability deposits bit makes on these reprice cuts the a we deposits rate lower, to sense. to maybe that reprice of those time way place? going going come idiosyncratic you ability getting going Or just lag

George Gleason

Cindy, do take to you want that?

Cynthia Wolfe

Sure.

a think way describe to good formulaic probably is I it.

We maturities were ago. have we year rise what on doing the based begun a in

anticipated is retention. and pick up May than that June. we've I'll the only is will that thing And that our we say So in noted better

with makes predictable. just I'll continues, little color because been really that that hope more retention rate of CDs, it give our pleased that so our we even that, that we've far So and maturing bit on

Timur Braziler

give was I standpoint. Great. Seattle the And quite then substandard credits, loans in office know an on just Seattle looking wondering, quarter, new a that at of reappraised were exposure this I'm punitive from LTV of that's your we just maybe other quarter? in had update quarter. last an that Pacific from than last couple loans higher office those more the Northwest then of one you And expectations seeing your what this some around markets? might little bit a broader be there and us is

George Gleason

do want take Brannon, that? to you

Paschall Hamblen

that that those we was had did called The out, bubbles Absolutely. of that Seattle described you. that to the Yes. had one floated office downgrade we substandard we up previously

same there. issue So

other had that industry the and to made be of broader But aspect that are the affected place-making the superior by been from region. have mixed-use just risks can't risk that sort more obviously, I outcomes results to but product XXXX, where Northwest, the I the any -- think that relates home superior entire other, that of some more question of Obviously, we got various mean, 'XX? office, the some impacted situations having -- turmoil leasing some might you've of of has it really of one work you've particular overstated market has got in have that submarkets overgeneralize, that the or in sort challenging. offset the might offsets you as has in

been part the for the as northwestern we've -- a active will of while. say, we've But I not country in

So the value. our just I of in somewhat laid are lower views would out say terms origination that

the I of been happy Seattle XX term of couple did the we've the in long that part on do our are a active less exist play I it. in But of will see the It more But years, in but we're reporting very probably are part out. does substantial resource book of the remember I take geographies to positive such opportunity yes, did last return So that don't some more was to trends who developing list. or country. don't a think there having positive trends a there. source, I recall that sort top although --

Timur Braziler

Okay. Great. me. how handicap the I And about is loan books extended that for And it's to in think Any last that on update as we loan? of land resolved it being then would October? Chicago October. the you on should advance October? How in know still been just

George Gleason

land in had let on comment tell been specific the The thought that we've went road year. hard. on the documents to way would each not me I right good Brannon, concluded I our work Yes, down and we They progress over of the assets continue capital potential discussing one was you, they that. Chicago solution. source last that management comments with deal, the

continue reengage million the some recap But positive interested a came going up they stepped more $X certainly successful. time of million the that work view to previous up We viewed it capital they in not they're $X project. and to that. with more plate table to conclusive positively, put that parties to So to be buy to that that on to we

it they're $XX a There's step It's we set long-term as I final the the million. but the get the but should down discussed of close on effort, Likewise, years still if XX in to which described a and yards viewed of wind Tahoe -- the hopefully amenities, we field, books XX, that payer that the new our gets the this years. first Lake quarter we development for workout downs, number positive number have closed of million a of credit significant really a forward sale a is on long been near team the $X as of million $X no what's farther step. from of successor been down to zone. way way handicapping end of a

an view So step. that important we as

went didn't project lot preferred And the put to it fact disappointing and side can each million $X energy to paid of and money extension, that fact they've We'd $X about we serious up close earnest earnest extensions, LA and of of the $X million as was But to is certainly XX-day fee money fee us. us, put million to $X flip our they're of million that more And a they that fee with additional $X mentioned, close. effort a income nonrefundable XX-day and that shows the they're together putting a land project for spending X million and nonrefundable they an it. a exercise. lot got money

that So for both that. as earnings on hard viewed money a commitment income going we the and positive

hotel And then $XX.X million book. the we We on Seattle added that's books. the an off sold million the asset but loans Minneapolis $XX.X went office,

you $XX.X assets. asset another get as and rid it it an million when with first down an view $XX.X million I So of replace

those related viewed those we So positive to as all trends credits. main

Operator

Citi. question next comes with Gerlinger Ben from Our

Benjamin Gerlinger

of the of have was questions thinking extent. some Most addressed to been I kind

Just the in last I with think year? could the give of is leading curious, Jay some than just was XQ a how year strong of growth quarter-to-quarter just on you year. what pace growth guidance potentially always terms to was a did of when down I'll follow going know really and of difficult, forward that specificities. the next also kind indicator lumpiness last curious also it X seeing this you're Is strong the quarter, a and a also tapered kind we following the the up this of of to but year kind So kind be year kind deposit back overall year. just transform? about really But the XQ maybe I'm loan of Or really that over quarter softer of strong cadence be strong pull 'XX, then half of here growth? quarters might of the I'm a bit and I little which But mean,

George Gleason

stability and total of that's deposit deposits. we growth. I be have balance billion, or think on of growth management down. comments in true mean, lumpy I and is basis I could or would fairly can true billion prone business and quarter-to-quarter. of the the don't origination, certainly swings is have quarter-to-quarter more would deposit the But quarter-to-quarter. that's a our document, I quite think sheet less sort range, on billion $X.X could of billion Probably color vary We originations and some side $X.X I of of made much for results $X.X certainly of of bit variation parts less wild would say more a I we pay growth steady quarter-to-quarter, but all with and comment from can linear of about that quarter-to-quarter. $X sort expect sort of kind you payoffs, line our expect different thus granular of -- to in lumpiness that performance more the our straight and years the lumpy

Benjamin Gerlinger

you when it of targets that just then what on And Yes, about thinking it the best-in-class. know kind But then do of loan-to-deposit terms it's you. sheet, ratio Or that's just said XX,XXX-foot you needed? the do have what balance does your Got kind loans think color. RESG just any kind helpful what from you in deposits a just ratios just of I match of just is of really and view? because sort where grow the your

George Gleason

Tim, to that? you take want do

Tim Hicks

historically, the in mean, low to ratio. we've I mid-XX% been loan-to-deposit Ben, Yes,

at that much anticipate And so don't all. I changing

monthly out needs our And we our project initiatives for basis So on projections. in do deposit-gathering advance. we based XX months on a funding those adjust

loan-to-deposit do the much the to look growth And in asset it and so fund keep we we how as ratio term. to at earning long really low need mid-XX%

Operator

with comes Brian Martin Montgomery next Janney Scott. from question Our

Brian Martin

understand you've to Just already, trying constraints teams? I'll at there, adds these talent given added? broadly, short, to of here. you're provide, But timing businesses? commentary keep And these anything I how guess? just the existing directionally George, headcount about that's the hired on the mean more any thinking that? just specific given just, you is can are it Are kind of ones out least it new I kind that

George Gleason

now. teams any lifted It's out. not been We've one-offs

people as getting governance it those a with deployed We hired do. to those a -- but up assessments and in team. we've we've we As really them and make way. together the in part and do training think the hired do we acquired some ramped and guys getting who up our several But those them past, to quickly it mortgage started about in going proper a with started people ago as great right to individual to We as we're didn't we're initiations have hire mortgage little and that worked on everything yesterday business. that and lined originating sure all We're turns out, talent, effectively We risk were the can. need getting in it business, and we're we individuals. the we going talking over and year

aligns take with to generate credit philosophy new very members our team these takes we on going and it time from because the that we're risk it corporate it's business So the do important that profitability. to right fully

excited So we're about this. very

much hired more it's across of in pretty we've eye but we're got business some members company, need now be that team and out and lines kind great units, we have on great in some of our right those members. to except fully question, And team as So adding said all indirect. talent. our we We're -- where built not everywhere RESG in we're else, earlier

Brian Martin

you. Got

Okay.

given of here the I how there? it's talent thinking have the it's last kind -- and the you're appreciate outlook, on just just don't So more Tim, any Tim commentary levels is lifting already two reserve reserve done? just And the build to just businesses guys existing business rather maybe lines. if -- heavy I adding That's than know about that. you more Just for maybe but on then new

just secondly, capital your in maybe of the go the year? side, then be stable And the the you I that can capital as up is growth expectation guess, through think given profitability, levels on or I balance

George Gleason

of lines and which But we business, and initial the to do Tim. add that that, offered that controlled years. I want couple will quarters think, yes, years. introduce members will focus, next expansions business team lines do future I hired in some will of kind to to answer launch is add you But manner. the we business a I new of in of intentional, we've services bring will and by businesses existing us products existing but very will that those businesses, these ultimately, broadening think of additional we and line Before say that not some lines scope very of just of incrementally scope over broaden incremental the

Now, Tim?

Tim Hicks

Yes, longer, an the some in we for higher net provision stay question, why trajectory which higher put of perspective borrowers and earlier your rates from you us, in that the on we on could the call, continue Brian, as earnings quarter. income. is our But interest had our of as build longer, see good from mentioned some rates being to for certainly pressure

the costs less some rates down, on As puts come obviously, interest of of that borrowers. our pressure

were start down. rates And time, a level of coming anticipate to at lower I a so would provision

George strong obviously, that that increase and your of on the to ratios, ratios. maintain, grow support to a our certainly yes, have it depends of and think earlier, of another us quarter expect would an ratios may our I -- over capital quarter can vary our to capital year, to capital in growth slightly decline as But But make quarter quarter, ratios. said growth. risk-based from be able X on and capital a question, a I lot earnings from our growth a profile strong will quarter do quarter-to-quarter profile, will then retention quarter's -- but it I capital what what And they mean, from earnings each do can basis, of a

Operator

Our next question comes from Brandon Truist. King with

Brandon King

XX% that up one get the you mix and for the loan think Do following to me portfolio. you Just there? commentary total to M&A around for need on RESG getting

George Gleason

No.

you know accelerate you're to not. could that. possibly get or or an never augment if But M&A going think acquisition I that

it. we I need don't no, think So

think I we get there organically.

Operator

from with UBS. Our Varga next question comes Samuel

Samuel Varga

sort a months, expectations Since for the as has difficult like the to goes much talked little see as more over bit floors about don't cuts that the again bit you that has last you. X, the of of clients fund quarter, has last potential Fed negotiating how George, a make it become sort X easier Or at? get the floors? higher really they shifted once

George Gleason

want think our rates think the not they No, some easier. Sam, when I lot customers of it and don't relief at and we're it's rates, they down at obviously, peak come point any do. But difficult believe most some think made I more has they either. it will a of

So negotiation of those the making floors. that's

need need conversation. we in we difficult So -- continued do that we regard. that to what can But do

customers can do to do. Our they what need

very intense a every it's So transaction. negotiation in

Samuel Varga

just And Understood. quick a follow-up.

could up baked come own allowance there into you're view if to appropriately your on the unique and the adjustments the because was effect is have today? of seeing disclosure you've actually I because lag what valuation appreciate up, be to wondering if not sort LTV already catches that You Moody's -- Moody's in obviously of have your pretty portfolio, migrations, quarter-over-quarter. scenarios? sort it a the where has all you view think seen, a Or if I but you that, that's of

George Gleason

getting we're are appraiser. that good valuations is the to our information valuations on think based I available that the

back are push there appraisals and bad ask push our get cleaned an back, guys services don't that the appraisal up our that line unit misinformation and independent in -- their prices up. get reflective if company and get we assumptions if within are appraisals, and or So we they we think that's questions,

appraisals good. think are I So getting we're the

adequately all Moody in the various that is relevant the of belief ACL addressed our appropriately calculation. and Our are and factors models

maintain assumptions. to distribution continue We a of cautious pretty

is of distributions. Our a combined or is scenario The majority a the and as sort landing characterize I the of of baseline adverse maybe than effect you scenario. SX, scenario, SX our SX economic the is hard less which that the SX our of scenario which Moody's stagflation scenario. Moody's allocation downside the and guess the

geopolitical fact could moving impact we've variables lot our political, scenario that that selection So I that selections an and customers think economic, of losses. a just credit and appropriately predicated got on scenario conservative

degree view So the the just fairly because global of uncertainty we've of of high economy. taken that in cautious a

to X $XXX So had I our what addresses target the last XXX $XXX likely has stay rate, it for million. started a feel about the million in ACL, in increase gone while. $XXX We've good basis the Fed ACL our since doing. quarters raising we've appropriately mentioned, And million over we're rates, as Tim a funds fact got to increase there Fed seems I which, and that point think, a from

Operator

George this question-and-answer Gleason That back to concludes for and would closing to the the session. I remarks. Chairman At time, call turn CEO, like

George Gleason

Thank call. and you to forward great an XX much We with you giving you. joining you a Thank days. in quarter. Have for talking so update the look about

Operator

for your participation you in does program. This the conclude Thank today's conference.

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