Bank OZK (OZK) 18 Jul 242024 Q2 Earnings call transcript

Company Profile

Participants

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

Call transcript

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Operator

Good day, everyone, and thank you for standing by. Welcome to Bank OZK Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to the Director of Investor Relations, Jay Staley, please proceed.

Jay Staley

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

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

open We now for up will your questions. the lines

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

Operator

comes line Stephens. [Operator Olney with Matt from the for Instructions] And One moment of our first it question.

Matt Olney

included? I start I So how that we value additional $XX the I Any was project. on they're color the I project that color that on the intrinsic commentary. guess, million Any capital science million. life San mean, assuming of management to new why off, of $XX guess, want capital Diego and you arrived in have type presumably, the disclosed the some on amount partners the at

George Gleason

loan to include requirements reserve the our and Matt, all loans in that a are our was a documents. replenishment our mathematical for on judgment subject simply calculation that judgment reasonable calculation based

from additional just there a scheduled was was and regularly to reserve equity, was it come no that So calculation. it. magic replenishment was mathematical a It to required

Matt Olney

new details took the in collateral? any there, it of equity out just I $XX the million, Or mezz the place. behind guess, more the take of come Just then original form And that up partner sponsor? additional transaction kind did the Okay. did following

George Gleason

for due almost Came deal. into pursuing where cash contributions mezz the in as and via wire on it. it. The bank, in transfer future original is transaction as in engaged interest transaction sponsor it's engaged partner pursuing all the The and the reserve form in fully is held and expenses an the capital account a totally equity of the

it mezz had with this mean, financially strong analysts So the capability nothing the we no they the support on deal. the the It unique the replenishment as the lease reserves. If lease capital years by in who capable us was as years it -- those clear drama or I questions we X we the have confident is this questions your business view it. I this on no transaction, on avoided about was partner who capital to like, about been given We've wrote unnecessary it had gotten publicity the attention with X in very supporting Mezz or could high-quality And cut. But our it. And consider this could or lender have deserved. takes probably asset, as engaged the to of think our the a group regarding great it, to a and the on Are needed. transaction. about it. years asked of will as in I'm very report finish X all it research -- locations in sponsor had of lease line buildings strongest drama about standard guys that's thing the certainly full is standard to, support Coast very if never of West bothered we a But a have two far and the parties in discuss ask forth, of strong, asset best if to expect it. There asset. have it this comments, their they the lot it equity the done management so partners And excellent to well to on part Its this. the executed any don't it? there and project They're if what's and continue sponsor structure with proceeding should to project is who's explained there, to to going because it's very fully partners two we great disclosure said X we've an we one we get again.

Matt Olney

if under still I'm Appreciate just drive getting lease-ups period, on trying be graded understand necessarily that project And or and for result rated. project, the that would are the the one just below reserve the questions that are disclosures all interest that the circumstances just project. I good to plan the from would loan being behind plan to is rated. broadly, specific a behind us more appreciate its pass the but Okay. that pass circumstances something guess construction loan help of not any appreciate be that to below construction loan investors in construction that

George Gleason

going Number on it's totality was of that one, to Matt, expected. their partners may maturing slowly be their support sponsorship quality we're depend little and and strength investment to project originally and a commitment more circumstances. the a at looking to capital Well, than always of a and continue

largely in have to to have of evaluation a the you're and sponsors this years to project to us the fits until upon project or And that Diego a the tremendous leasing. capability the will the it's the project. down are do you project And motivation So certainly that year is, or carry capabilities number alarming is criteria. The of the delivers It's got if support capacity next and sponsors that drives sponsorship, their whether to outcome have that have not project they X and going the on outcome, road. And two a projects. quality the certainly is investments drives our successful positive have The have you've successful our certainly without project it motivation to expected in a year X particularly project project. prognosis outcome. that a the successful the #X the going you just And a customers sponsorship, the ultimately project then long-term one, have #X. sponsorship question view and who a of that number outcome, of the dependent is San is support really quality nature of

on all If is portfolio, you've loan-to-value members value got -- structure. XX%, of basis. When our loan pref equity capital reappraisals average project XX%, still cost I we your loan-to-cost, That's cycle. where the invested of is or it's where mezz, loan we the subordinated even our cost as on think weighted this a a average now? to are in that And of our got to XX% average Jay, with you've the XX%, equity are

motivation an have You have nature a of the to cap stack, investment. that defend the very you inherent

They loan committed over example, mezz project. For to the lightly. that to San $X from our not capital in investment walk Diego $X.X projects, have billion, on billion a away billion the going equity and that are partners $X

the standards. are designs So is second a to of principally in capable execution? Now part XX or or are that those have just bad that And the project or about XX-year-old successful are that world current dead. XX that there's having is, XX- older the locations, are projects lot of not totally projects today a test noise projects are the CRE of in built

support modern ground-up and to be our and investment. And construction new leverage sponsors modern that we've expectations sell motivation of that to combination because incentive two, to needs, low got the from a that of says or continue have our fact and standards, will their built ultimately our it the won buyers our is projects So modern successful. tenant lease huge because big

I while we substandard a towards or vast are those is a those performance or would of the of The solutions the portfolio, their special sponsors expected of have. that's given RESG until instances loans certainly true. What all since two -- up economic raising project the have property OREO And the on And out X sponsors tell the we remain majority pieces of conditions we thing our other we've on about sponsors would that you this would to normalized to engaged that projects. state. said lot a rates started had have Fed a stabilized handful I in loans where we point mention working of in continue we've and and reached current the you, loans a support only talk projects handful and

So not it's every current of our one past due. and that is credits the substandard performing sense in

do from we caused small that is support continue on Now project it we noise about their them the put to us on commitment nonaccrual one it. some And of down. because wrote to that sponsors to what

and their wrote their out it they the of monthly to term. project the got. we've forward of view it's craft But pocket keep So to this path it some their month, consider that take have on loan. that conservative to pretty we because we investment, current sponsors proactive a still our work, salvage but challenged payment loan a these down interest things, a classified made try even with continue will that, we We most

Operator

And for Catherine from KBW. is moment One question. our it with next Mealor

Catherine Mealor

But larger paydowns, Let's the half that will which the down. know Or look any large half the get was larger for that kind think just I back year. paid of anomaly, of of that to back any on back of foresee $X the like you start Are there that were mentioned year? in? will thoughts come on $XXX you accelerated what in like million credits there recently seen to that we've loans you two were this this kind the billion pace kind more of level quarter.

George Gleason

in a quarter all or may that this vary comments about quarterly in the happy have were impact have our from we discussions quarter and may significant significantly quarter-to-quarter Catherine, paydowns, prior to another. included paydowns X of

QX, in the seen that in year. $XXX quarters billion So to paydowns in a form, of million X you've $X.XXX first dispersions in wide this true QX.

for telegraphed a RESG repayments first its in and expected higher have just of the quarter some showed of in future, the future signs ended. manifesting that level we that We time

to movement. because some think range probably dependent Fed more getting September fall. year sort a which on be some going lean very that QX of But best December. repayments projects quarters going rates when QX QX from repayments QX of on billion Fed will and had our to or in I'd in and cuts initiative, is is heavily over our within the my $X.XX move you'll quarter-to-quarter surprised into be begin when think of really will see and that a QX reducing guess to probably to the see vary of greater that I'm really significantly acceleration move. My best getting quarter-to-quarter. couple if be we a really pay downs And rate don't I big or we I going think, until paydowns frame and starts I comment this guess rates repayments can is QX long-standing of

So probably QX I QX guess. best current of low, those QX think middle fall was somewhere our the high, and QX was is in

Catherine Mealor

you little a next how think That refill And paydowns X% your business, loans decline that couple makes or outlook size business? What in RSG grow potentially you next maybe over that's and then refill this fast trying for your we And of know of to a sense. balances? $X I loans. to expect you to years business about just you lot year the there's bit now CIB to a are or as bucket. Can about that expect would momentum typically in do? of accelerating about talk and billion doing

George Gleason

with Hamblen, Brannon of the us the balance ask who's for on in to going to continued our line growth comment handoff and importance future on the in sheet years. I'm that CIB Yes.

Brannon? So

Paschall Hamblen

Yes.

achieve about. this to They well working respective a growth, RESG mindset some incredibly we've team is finance three. And the latest solid more of that that and CIB you their as in working all sort sub see, talk ahead see live credits, have different $XXX have Catherine, the We'll topic RESG that's of are $XX recent be been of it's we said, a as the of and our quite up the in they their not were added most for strategy come new last million been highly the already for that good quarter some are You while. we've And we've credit opportunities just and that have credits, some suited place, And range. in portfolio billion. We'll great ABLG team, phenomenal couple loans But And but of know, connected several made members. of the on. got it's bet, they've can evolution join yield it, really size you aren't us is on But Great expansion a in as a performance as it question. of X% start that to ended. priorities, us but about indicated, had quality have we really hit thanks talented, a call to originated terms those transition we as team And more the as the really of of really some over to the and as heard the which, careers, as teams folks said the talk always you that in million expect of there's great of big of lines you and made our years, and of have million in. RESG in a have as latest to -- credits, on ability sort funded in monitored to to time. The equipment that quality future. of we've size started loans, also the so, a that, $X.X and three us relates credits, business front credit noted the have million, hires some some actually the to incredibly to that's bigger. sort $XXX We've question, George. team we've for they're lot repayments the uncommon in sort pretty will George something of like just are $XXX good of very spread those demonstrated stride. as

should So growth you near to likely RESG very off, a from smooth George passing loan a the repayments see if what be beneficial in of hand -- baton, future. We we said, pretty we in sort as accelerate, manner. the as CIB we've of the believe will, orchestrated

almost shot great timing that a got at in we've manner. think I an optimal

grow, So we're and grow about book. our extremely excited diversify the there opportunity to

Operator

question. Gosalia next our for Stanley. moment Morgan from One with Manan And is

Manan Gosalia

You books properties, bottom a on at invested taking that for stack. assuming much to the of lease, that have stays sponsors the property they've your noted also time of longer. if it is lot support to motivation how given the cap I'm the

what the reserves? So I and in books an the risk repays? guess you Can you in stay my do does for question longer? when is, loans mitigants essentially it meantime? it Do the what loan, bake interest-only more borrower until they Is bring extended they explain on in are

George Gleason

in Yes. date us is if to of tell troubled those restructuring, been in were one there would those world Manan. What loans do Happy that cycle TDRs. constitute old accounting so, would of I not on this the debt through you our concessions where by portfolio a resulted having were TDR, to any has we any loans management

time handling make to So to takes transaction we're sensitive like of in not work becoming things that it if out. sure we're our equity these the

cases, or many of and on extend So to getting we And appropriate. typically In pay to those. The pay standard on have improving maintain upsized those loans. market many loans those to fees cases, on replenishment rates we we're we principal as terms. require downs rates sponsors those current deem continue reserves are in the

is equity responsibilities. senior responsibilities. We equity, equity So We're equity as don't equity have secured the loan.

with we that equity two But properties have the there. these have said, things. groups needed, the lifting I sponsorship where has the done our sponsors equity OREO the So of as to in do on that exception those

substantial them thing the loans are on may the we're doing those example. And book. I'll books we good longer longer. long in those way sponsors the those loans staying We're you structured on happy as on on credits, are to feel as on yes, those. books have right the a stay So but making give profits a the that about loans good

resulted I million at the selling I of in out, longest-standing to sell that probably those amenities about in maturation loan. I interest $XX.X this quarter in a beginning that believe some classified the and sponsors year, paydown paid loan, the amenities project RESG reached the balance. have sponsor that as club the over had progress were believe fees point the there our which opportunity out that since asset time in the was in near was $XX.X funded and that with looked an we that it and that us portfolio life million the loan, project had last but that club haven't the million roughly same of Lake the that our our Our the is Tahoe development on on nice of $XX-something which is development in

thing. do we us classified And would program. if They be to the it to fair asset the lender for to reasonable even to profitable going terms to right successful doing the have prefer conclusion. We're got the if that's a to the while but on has equity with a meet and on doing those sponsor. Again, to the to classified going interest we've to that our thing, rising project and on not work responsibilities principles the for asset be challenges, prefer reasonable loan is fair got the the books get to they're performing up Then the a always. right Mean long thing challenges. our are the classified long project that's the got right and so So with not with on thing and and would project we we're our that to fees got loan, thing and responsibilities for do the and The them. prefer originally sponsor the agreed equity to But and do paying work term, working have the got sponsor time. and senior not do we would got do sponsor have we the sponsor. books the right we do a paying to a

Manan Gosalia

general Maybe slightly. a it been great are you the NII. bit us of dynamic? staying on works? up market? function books a just in walk talk proportion coming about just on CRE has is NII That's Or time that Can Can from Is in how color. that through just little indicative a a more stress as reserves rates the of of follow-up that higher? you loan the longer Noticed ticking interest more for while

George Gleason

my the reserves, is it that have together -- all sources any whatsoever. your from capital Manan, function put of day deal. you When the reserve. It's funds interest here's down coming a oh of loan, on But and not at X. you're a loan stress like, burning from sounds Money stack that on a gosh, uses loan you and

of the the So into interest period life loan construction, over the construction is of built the of that.

cost, your costs, construction go your cost into leasing to sponsors your got got in. hard You've your the put of put interest fees, and the cap want we equity We commissions, that stack. land got you've your in your tenant the your and tax before closing reserve, improvement reserve, costs all all you've their

So cost to project. million going sponsor, at in you're want beginning. We million fund this the your of of there's okay, $XXX the $XXX Well, first. say interest all to XX% if we the no to come

your and the construction. complete is kind of to $XXX million and loan. in then Well, the architect's that's all the all the in the of and last is fees interest going initial closing the So to construction. And beginning occur. But to we cost that's going come land when sponsor's money title start funding policy of the the

made of budget, carrying So in project but all interest our we're we by because equity of loans these put upfront. subsidizing interest, the all is the their in the the sponsor on typically not

million it and and put and time then $XX But the structure he say, for rates the $XXX what upfront other in the intelligent $XX doesn't that's what $XX have Now to million or the we if million, doesn't sponsor, sponsor the pay your stupid not million. when the an of interest could then checks comes checks loan in be okay, the interest. write you if manner really

the sponsor all get that And smart money because is the to it. upfront So means way in the all our interest do reserve loan. safe that's we

loans, any these in big we're those that interest those no weakness loans, is that interest equity, there's of is originations mean in interest of in we and credits. have XXXX from the we sign just before. reserve equity is doubt in up, our we've way built It reserves the we means that volume weakness. So coming more about so anything smart that on being loan. means in a record about got way make or as sure the structure later, in It all equity doesn't funds It the the funded first, not than

be those into we've typically was not project. that's stabilization to our also enough carry stabilization, If more so lender longer loan and into the sponsor has reserves. sponsors to with and the a end got an sponsor Our projects the equity write it, additional it reserves, refinancing to as longer carry has interest and virtually to or loan through construction having modification then get replenish expected quickly takes construction those budget, of obligation to responsibility, And leasing structured built replenish if equity renewal. that get every it or to to selling the is then checks we to and the not extension to responsibility. an of to that's Those interest it carry put to what because happening the project

Operator

and our line the for next question, of from Michael with James. Rose moment Raymond One is

Michael Rose

projects one somewhat to analytical what relative you in think, just nature things get the the horse wanted where that to project I think particular. life done. credit, because a of proportion or somewhat wanted back sense but of do, I lot of nature that's loans heard sort of are I Just typically a spec a the go to for from to -- your And to here, science have loans of is you investors dead -- history, if there's some of percentage kind I work spec beat of the that which that contrary in not to

some there. even Good lease-ups, some in the should good I'm just difficult concern that We'd commentary that is about? getting. question challenges. of we be the in general condo markets. And during projects sure certainly a pretty It's worried more a stuff You're love

George Gleason

think you I in any No, our should it's and of all, worried it's about sort don't be business a at strategy. concern not change

parts first we have properties. The done unleased large made that unleased very on know XX-year of loan You was a we over history are of the what property. RESG totally

So basis it's inherent it's the charge-off of XX-year our in net business that reflected model in over X annualized history. point and portfolio ratio the

love to Now it we had transactions significant not vast and and love them. pre-leasing leasing, us when transactions done we of majority come have always half pre-leasing. But the the in we've

when retail don't -- portfolio you was our back back XX% Now build a got was inherent all XX% retail retail, so to if XXXX did retail we was center or you've those leases of there. and probably of Miami. because lined shopping up. Condos in you in go deals spec, 'XX Pre-leasing or

happen repay You with to your of New circular loan almost always presales deposits construction offering be the cases, doesn't have most go a XX% your in presales. with to you down. process you're close process approved to since loan and midway the enough government XX% there. York, high level that when typically has further. in Condos state And through through or until And a

all markets typically got having deposits have get instead things to deposits in project. X the the XX% you York if a New vary over or presales, We structure, mitigants to And point on the typically Miami. These those a XX% all business of you You type loans, XX% pre-sales of condo those do XX% how all country. by across in points designed are know geography. country is is. done We know be risks. sponsorship market and And leverage what to capitalization, appropriate to product our

about the what or that. done, things. about we're shift good no underwriting way very we we've there's always a is and feel So or in This thinking degradation

Michael Rose

We've all ramp very of That's what the the a areas helpful. just CRE and And as there. this regulatory guys XXX% as I drive capital issues, banks kind I the migrate the always follow-up. guys? concentration that well. appreciate over raises the for But XXX know on been and below in a as kind acquisitions address of the should some kind help to ratio is some some over there those downs, about is kind how sales XXX, up CIB goal of you for we're then those know operated maybe sales, maybe portfolio. well to focus think pay expecting other actually you thresholds? and above we of time focus the as below of seen there's of to time? I Certainly, Is have some big

George Gleason

The Michael, balance asking goal for is Thank to sheet. diversify And question. appreciate I that you it. so our

really in real commercial and among very a most view deal we expertise differentiated is funds, worth the have projects. people, and even exceptional that of highly We including of understand in within banks a about leader that all different and our my in understanding level and for expertise Estate level for, the built commercial among and deliver of from think way the Group our Real other view, real estate. we're estate field Specialties folks and conservative, debt that established think understanding do the is with the And have a than ourselves real on what of a enjoy I estate execution community lenders, we that conservative we we we're but great paying respect clear and as

approach that to performance have and conservative very opportunity top I we an extraordinary premium a Real risky underwriting to and with extremely mean, potential, unique our commercial at standards. we look we've our we want other of ought do that return efficiency, lose the the whole business, we our want that a and our multiple and understand at over premium. take we be high-quality estate. folks and businesses at -- grow consistently that can on high-quality the of a also there public, commercial to if -- every that let is at business our estate financial -- Specialties And you getting to it We we're that X grow realized are look or to X industry. We're because been numbers. seize all in be consistently look its real continue not equity, peers ROA, Estate look premium we've it real Group, let has manner, not RESG high-performing built, we yes, to disciplined. expertise conservative a capabilities don't also don't are metrics complicated because meets our been group at that getting trading We extremely our it. the of full if But and built time look our we and at business So We bunch performance at realized around we don't disciplined to grow know but

a So at from of our peak and balance lines than the our even grow because to funded banking and what as of because or to all loans we're opposed child that, on lines for world opt years, of or have to let X performance we that's CRE, the premium that the though community business, indirect XX% of CIB loans X RV it based being going the X us over to do and of everybody poster several company's marine else. XX% our it the differently, of multiple, the multiple funded community suffering achieve consumer discount X and business we our next was the goes multiple balance banking

multiple It's sheet not specifically probably diversifying of be we So the the XXX can yes, getting we of want is, that the It's our diversify. That thresholds. below that high-quality and a our will so just byproduct We're XXX balance natural performance for we on a though to the shareholders product, deserve focused up. goal. put get the question diversification. to not your answer

Operator

with Scouten is from question Piper next Sandler Stephen Companies. Our

Stephen Scouten

I And But going quarter, indirect now? question. to I you Catherine's CIB within term. the So there's to a terms been team? And there And of to started couple of as me Can if your continue saw commentary Brannon, it commentary that people that how want appreciate questions around where that aggressive are the segment. and this you to have a -- color how CIB of many like RESG handoff build of give view that know point near already. exceed might looks we kind we in reach here around specifically, to within marine you what contributions for seemed expense large hiring --

George Gleason

tell XX% up ended. portfolio. XX% you, between to like were XX% and while marine, the of for while -- quarter long of just bouncing to XX% Yes. targeted indirect, would along our in the Well, we've think I -- a on and bounced be it We that portfolio, XX% I total about

there. going are don't to XX But XX% adding was, asset-based finance finance before. as lines know, additions. We or in would months, who XX we're doing mentioned, may that head I approaching X far business Brannon of who those And lending X that's that folks just I XX% It and a of a to in or people fund as our those... and is count in so equipment a be people but lot stay were staff the guess they're few, people last of had, So and incremental knows. range. adding marginal not we to XX%, nucleus Brannon get

Paschall Hamblen

yes. George,

they're with all when group stressed be they're all portfolio how are can loans, to, senior opportunities they're think light that opportunities into on, that of those I origination management they they but manage are said, focused can a And how cross-sell very know, on, on they lending of how sort to lending They they've little but really there, how credit. a a take not sort the side, as Stephen, well. finding calculated the really I for in probably a strategic organization. great of it's manage have, you and approach great but it's across mindset downside as north as around just which bring built to across who originated been, they're what can your nature --

and up it's platform It's brought and also but the life how lot to There the defensive a middle significantly loan is you structuring portfolio. and the The in So of it's the all way RESG. really built being really front a the of a very front way side, that underwriting for but on built not deep. monitored being infrastructure is kind in similarities end cov-light digging cycle. of

really been know, as way but you the organization side. strong the So management on on the side, hires since some yes, the bought great also made and George we've hiring And ESG from hires portfolio our run they've origination some -- the of portfolio it, it manage well has right along and sure is and with right scalable been to make guys quality, these sustainable and kind credits populated that. quality, quality the are way doing and that and throughout the path

Stephen Scouten

Okay.

of already so -- continue expand Or it expanded it's mentioned significant is that the will kind already, perspective? ongoing, in from you kind like a it occurred? of head kind guys a it's And has just count major lot to to clarify, but of expansion comments

George Gleason

people could. And of success up then nucleus that why having skilled people, couple cheap. guidance having people around, his we hiring why building XX you frankly, from that group range quality will people then And end we're XX than that's and to hiring We're, are more that's had. catch success we're as a X expense max. and thought that X having and probably probably not north we will that percent next we're and you around that probably rate I or back I had we're window to having length people an over our because with were, time it in me there gone XX we're talent. to of to grow we And finding year, smart, maybe as and people in this people to of are original know, folks. we unusual XX more be to business more critical talented, lot great add the XX at would guys speak high-quality, lot X XX there people to Brannon said, here of continue high-quality have have a up are high-quality a would our XX of at We'll and pulled banks people. are percent under continued XX don't and Tim these heard group and is highly there. And in skilled we essential highly the a by in with We about growth XX group tell more I Tim, or We've is that than possible, because area, now. that thought people guess experienced XX more people or and And -- then But business. grow.

team we harvest that mature to on and those can get the those add businesses time further the while it's talent, guys So excellent talent.

Stephen Scouten

mean, about opportunistic. the Yes. a side, to And presume in potential another would might that repurchase. some I be you like repayments some sheet? It announced larger talk of stand That's fantastic. and obviously then capital capital diversify [indiscernible] the M&A then as maybe on also I the capital And you I to would pickup these feels big share we more and precipice of deploy can against open ability know balance up the on M&A. be

just kind that guys are you record of thinking track wondering there? So your about how given strong

George Gleason

occur, a any if to Well, noted any. always deal an great in transactions would first, doing that this on track And are And We've that. there transactions and on got a opportunities the opportunity that's favorably failed the bank preferred FDIC record And very love history that. we'll those. year, continue you have look to is acquire way. occurred on if group bidder probably we one sizable were to we

a repurchases, stock way. But you that be capital So more to comment and want way the on Tim, would do M&A? preferred little regular

Tim Hicks

and a quarter. Yes. certainly, things of positive capital lot on this Stephen Thanks,

a We additional earnings unfunded quarter on amazing, far go of record you as earnings track haven't this and and our down, was The that balance with saw so during as the talked earnings. consecutive just it saw repayments quarter this capital. about really really far call the really on record power how is seventh good

you nearly basis than growth less had risk-based have in we saw recent points. capital our ratios when we've quarters, So expand XX

in active repurchase able disciplined to share to at are lower growth to when adjustments look there's continue that up another to M&A. Certainly, would to banks prudent at manner. at We've have that if was out Felt opportunities. there very times. M&A, M&A does open use that be need point, you're at looking and utilize that times capital. So place to we a been certainly is a like having authorization way mark-to-market your of in considered be lot a --

in active already deals alluded as be FDIC if other So year we've to, active -- and George but up been at certainly any as looking and we this well. showed would

be So try said, manage the earnings see in we tangible as capital. you during record -- had there. and to good And that nice it track book and to very ratios how power we TCE has was ratio capital risk-based was in value XX in prudent our growth we our our up, over was $X.X, another growth TCE been up quarter months or the up

things lot quarter. a happening of So this in positive

Operator

and is Braziler Fargo. question next Timur with our for Wells moment One from

Timur Braziler

I Yes, expectations when little of as a when the to wanted happening match kind of more a interplay there. underwriting ratings trends leave maybe beneath to of anything doesn't leasing there ask my at were I'll don't first expectations? internal scenes bit it question the question, set nuanced the kind that of risk underwriting. Is match leasing

George Gleason

and if is a Well, of lower but rates higher not those the or into or that reappraisals leasing question. at yes, changes with in And answer to costs just going projects. of internal the leasing reflect the longer expectations built take that's great expectation is loans is evaluations is occur TI that NOI

that their levels, very rates has the Fed risk now So over into raised X a last you within X of for then X the those ratings. And high seen our -- risk and quarters, way factors the or do at quarters portfolio. find kept we've first migration ratings them

portfolio category category one pass of that And for category creates pass that's challenges projects. ratings been sponsors ratings low for there's or special ratings. But to then risk from those XX and and are a of past seen. have a We the reflection you've in pass longer, A category just a to migration ratings. get are higher verified a substandard you of to low and pass more and mention lot not a lot them the the pass another our

seen those You risk the have of evidence ratings.

While disclose risk ratings. XX those we -- we haven't don't

losses that evidence reserve migration fact to last doubled the has for our $XXX million. of quarters, the seen and You've over that X almost credit million from $XXX the

qualitative X.XX% see migration charge-offs growth, that's commitments but portfolio fact from loans our commitments the and in gone the a loans percentage a we've you that ACL total that the time. of was period granted and chunk increase can over X.XX% has of million reserve So, total to and of of that $XXX experienced, after modest

a ratings percentage portfolio. that XX as the has total those that occurred So the portfolio. Again, of migration about of unfunded funded point in feel risk and in very loans percent basis ACL good reflects we the increase that

any through average. we As last said indication of That's not our this That continues serious charge-offs of in to that than rates stress the for in these stress going interest X that industry translate the year just year. now losses months but we higher is be and fact below January, to sort high to first the It's a some cause of year into portfolio. be well of an of still expect expectation. weakness the reflection

expectation the just last minutely charge-off But $XXX in But higher Our would the X million of charge-off over credit up ratio in quarters year's be the that built last is drift over half additional year. X-month the ACL why net could is we deterioration. some second again, ratio. that's there

Timur Braziler

recent lease online availability there to up I have come kind of maybe for projects? Or And order space office and some pressures that to broader guess, suit the widely think existing of life to have Sciences? some Great. the of -- cyclical Life of of what's guess, life reversal outside I science projects sector, what you I are cyclical of follow-up, expectations guess the what Do been your other of a convert I specifically, some these the need noted. some and industries looking as in of the some sciences? trends these at

George Gleason

a when our graph Coast that not -- Well, one of interesting Science, on if materials. does shown I our months ago, was clients, very -- West a it's Life couple If of was me you the who

life have years. showed click a XX this new ago was to IPO of rates money very Bank, October, into And was at, market systemic was who had progression from of venture by was the life increase late was science some been science money steady year, science flowing thoughts there capital period the have you've this sort was space in the XX, it companies. X smaller and well. steady the monthly a up but So time little slowdown into where be the also science there things September, of up last capital do to was as the in there life capital life we've banking it to flow last going and demand Valley funding the that there capital science wake in into in interest Silicon the chart capital when people looking acquisitions funds over you bigger venture in when like very, going life ago, space. there money IPOs. that little going a for space are funding to starting that IPOs. And venture began shared companies that industry that not who IPO X significant again, seen drive dried months reproduced And of then and science announced impact. or And bit. a flowing it, Those several but crisis IPO and and to couple there venture a space begin business, slowed. I markets those the a And months operate venture from And of of businesses of it and rise the life of was significant sort was there the

San hiatus encouraged there to fact returning very So after tenant year. Francisco when I science by last that space the is for recent space months do the that and Seattle was who by uptick on funding months a the that ago, in were of funding the clients inquiries a West in life caused couple Coast,

in So uptick we've chatter heard suggesting We've leases. seen they're a a of science life into sponsors meaningful quite little seeing translate bit bit space. interest different that that a from of in

was met or clients one So It I we I Francisco office like the for conventional other they the science for location a built in people. tenant talk a easily. the about with think building, It tenant had science the was of that repurposing to entire it's is purposes. had repurposable the at national their office but And that San that tenant space quality for when premature way life not building credit an science. needs fit life like tenant, looking for conventional life

So tenant science solution contention There as they for the other was were in space built science to though life life the with for a several was standards. tenant. not a purpose-built along even that building buildings high needs

or world not for capital lot And XX just factors population, So care long-term the is in over see on the convertible, leasing at science of the level, U.S. that to so the space to returning in that you're certainly, life industry. are there the only focus are increased life but factors space. government significant going of aging months the the because it a science improvement a health is I favorable next our but think

you're going to think leasing improved conditions there. I see

Operator

question next from UBS. Varga Our comes Samuel with

Samuel Varga

of they projects there are of certain to are permanent can these more there's see sort seeing market point? real of you a this market the just I about little industry. just pay wanted no a Or switch that to payoffs thinking off, there I'm of to back buildings as second. sort dive a for types perspective? view I'm permanent bit hoping -- a as industries the yet that at ready into when trend here your we're from or Is

Paschall Hamblen

George? that, take me Let

George Gleason

Yes. Yes.

Paschall Hamblen

in actually the coming starting pretty actually refinanced, to sponsors actually actually had actually, going of refi know don't a our it's permanent is that from the more had to actually were that we of I'm party. In a repayments some still most had that exactly think, opportunities. where, be try place cases, to refinance the projects bridge market. that But strung I in over from folks interest that been would of the And XX Samuel our are there carefully we quarter, a good spur terms in on sale? it's we've off we've the around yes, at how of all then think, us debt. had, just before, our -- months we as condo course, -- of I we refinance refinance quarter, it's sell off a of second The to we those it monitoring solution. out. sold, we the of of are I we in payoffs number, on of couple reductions levels But good financing. being activity said paid day, answer realizes much So have everyone tracking last what's seeing going understand And guessing to rate see first still going is been along there? And how what's were temporary, repayments some we're at question. movement rate the being much And our X, XX, X pay there. I third but end our mean, But projects. visions if by we're without did

I was don't think to Still level, them, I but financing portfolio. think lot the long-term at be it still though, and of term they on short going a a where long-term more most financing. There is floating on our of move to profitable there, rate. it, bridge for can going out is more desirable, hitting

George Gleason

Brannon, financing. really I cost-effective space seeing in would add lot stable, financing financing very long-term because of of a very is permanent is Fannie a and Freddie source to Where we are multi the your that.

people So a that's lot sought assets really permanently. of seeing we're some where away

with that, I think you would agree Brannon.

Paschall Hamblen

The the that happens. multifamily is definitely place that,

George Gleason

Yes. to But bridge of coming sponsors. lot a financing is in there

Samuel Varga

trying addition spread I'm Or -- Are due book those add then And the the on well? loan book's the are say, far. it. Got of What get sense are better the portfolio? up approximate resi currently over an spreads an the book just those originations is around to that, too, that SOFR? are rate let's then those? of point, percentage a to guess, I sort yields. And loan roughly funding as floating there? And my side so average difference just of on follow-up you as as yields extra a into to is that there indirect

Paschall Hamblen

I'll...

George Gleason

Brannon. ahead, Go

Paschall Hamblen

projects strong Well, in continued spreads. And going -- course, condo George tend strong I'll time and given spread presales, a hard you're Miami, discussed opportunities you're a of the yield and lot types to are in into we at in of the determined doing. which at more to particularly working is doing to phenomenal our can Greg George, Southeast of lending safest market as the guys same getting originating be view still lot of you spreads has take the The RESG leverage the out. A you how of that some especially really by on market the what our lower data indirect. job where see type. opportunity, get strong loans, earlier, product dive

will how book weighted the are on different a is generally, depending hadn't think in today the favorably on real spreads we've it move. But that, book. terms I believe, So on got thorough comparing types, I done what and of product but comparison the to I

George Gleason

Samuel? You there?

Samuel Varga

Yes. I'm Yes, you on Yes, here comment able George, to indirect? are

George Gleason

No, have any do you further questions?

Samuel Varga

where some on indirect just can coming are book are you was components rates? give out those in. the if Are originations I there also some floating fixed Or and wondering those Yes, color yield there?

George Gleason

I there. give the And continue stuff were, always even indirect to color in a really. steady the we very can't is XX days see and continue I from the think flow fixed moved all don't on to stuff -- -- last the business you RESG any always where variable. indirect The we is of all has much fairly

Operator

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

Brian Martin

how play answered, on follow-up is are on to consistent? sounds handoff about from that differences this how -- or there. like of on one they to -- some it generally similar? transition the significant just that a going have Is Most as of to out Is versus yield the Or transition on -- things yields ask that which RESG that yields one, have you the think mine to you the been the I depending the portfolio are fair last as was CIB the portfolio but -- there? other there kind

George Gleason

and for yield, have lower some mitigating going the get that opportunities on CIB some are we portfolio. factor is treasury The as those the to management CIB with well deposits opportunities. most part other The business We lower Brian, on of meaningful there nominal a fees as portfolio. opportunities

a if well, you So would going yields. a pure I to yield you're giving say, and up on basis, look you're dilute you -- think to at when you your lot it

and If you and on so equity it factor you at including all of forth. management cost treasury the basis and look benefits, return on in a deposits,

from margin close our I there's place. a just the same dilution long-term that. But nominal to headline to think fairly we from end be yield, some up number pure to going yes,

Brian Martin

you. Got

sense. well. makes as get you it that's Okay. helpful. with That And the No, diversification

the So -- maybe better margin seemed than a and just were this bit quarter it little just for. we other then was a the little like up one was bit looking on held

cut on Just outlook near-term kind if the in wondering or you potential NIM, kind next that do a see kind back of here of just you as get Just could would X we X your rate remind if into the great. quarters us be half? of to

George Gleason

amortization higher interest forth. origination level this repayments of Yes. you, accelerated in I level kind bit of What and higher so I fees would alluded little minimum tell to deferred we think of comments, QX to in a and the or deferred contributed management our

low average are to and say such hard million probably was or But high, these $X QX couple QX we side -- So low $X felt dollars. probably is. the It's variable been QX what of average, may a it's things. was like million. of on million have

noise, heading talked those numbers, give a little variable or management We big. The point RESG but XX not floor are to down the those comment rates. rate. all is the basis the Fed over is rates X the X-month a noise since there's most in floors start progress portfolio about of But Fed does And So too term portfolio start figure will the We've rates, which variable, cuts last lowering you a there. of them the of made anything months, some sort evolution SOFR. tied after when significant month lot in RESG's within those X of document. of we've

So them they'll the most and [indiscernible] anticipate month. that the just of XXth reduction of

a forth. So Fed it'll between rates Fed be cuts lag the when impact on a few depending and so days

job to what rates trying the to two, have as up, really that those mitigate get been and that. mentioned. duration book. Ottie is, been But to Kerley, of of good Chief I Cindy done trying And our we've So deposit our a floor shorten we've Officer do one, Deposit

started to pretty in loan the quarters X rates, deposit Fed yields would reversal book. over that cutting significantly a adjustment peaked So near a have quarter. and year the of quarter ago good long a X or We've gone book month got in term after second deposit a seen from we or adjustment duration they've X in more our most and

run of for that a So quarter we're quarters. the we've bit in see we'll over pretty a up short up anticipation X, or getting some Fed quite margin few well mitigated impact lined in reduction. but a last the We'll that give

Operator

Olney Stephens. for One question, is and next our from from Matt moment

Matt Olney

in by real said repayments some to The these like you that local projects that know was investors and in I I had two publications Chicago, disclosed, published large think one in estate larger been projects. New one XQ RESG track some were RESG was at York, larger the of the

second you that to are repaid these in if two disclose care which projects the curious were quarter? So

George Gleason

Well, and they're think prominently there. out the I been yes, -- market pretty disclosed

the expecting a a projects, give idea, $XXX to you they that then bottom Street high-rise commitment. condo XL sales New project. And an execution were was done building So TCO total project. the to XXth of but on were was to $XXX million, upper they and there and about on to Extell up about max project $XXX on York. side the million, with, big brilliant A fund while talking lot project in around Barnett, the an I've that start million close closing New that. have half to expected done We west that business always condo just group, of up funded we've the York is specific and read Gary

they year would have had some staying on bottom project would found from we their have that better sales this of QX, that in So of needs than the opportunity our just loan that substantial in paydowns kind of our half in probably QX the reduced met project. But a loans. refinance on materially

that us Chicago that, having closing appreciation with beautifully the sales. long-term and begun pay funded relationship. The construction condo execution. million maximum which up to had our our JDL's to One project, from great in do Chicago was done, and expertly refinance from that that on had for they down gotten project, for We away appreciation So to project financing of elegant $XXX

$XXX I MAX to sales. then that. down nearly fully at down in fully the from funded or million were started we think and -- condo If So was paying

just our execution customer excellent excellent from Another project with sale.

Operator

final I will to pass Gleason it for George back comments.

George Gleason

Thank more no right. being All questions. you. There

quarter's days reporting so call. talking another you the good for look much thank to XX in with your participation forward another We you we results. in So and

great so day. So thank you much. a Have

Operator

you thank for And you and all disconnect. participating, now may

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