Bank OZK Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 21, 2023

There are 12 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to Bank Ozk's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jay Staley, Director of Investor Relations and Corporate Development. Please go ahead, Jay.

Speaker 1

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

Speaker 1

Joining me on the call to take your questions are George Gleason, Chairman and CEO Brandon Hamblin, President Tim Hicks, Chief Financial Officer and Cindy Wolf, Chief Operating Officer. We will now open up the lines for your questions. Let me now ask our operator, Norma, to remind our listeners how to queue in for questions.

Operator

Thank you. One moment for our first question. And our first question comes from the line of Stephen Scouten with Piper Sandler. Your line is now open.

Speaker 2

Hey, good morning, everyone. Thanks for the time. Maybe if we could start actually around loan growth. I mean, it's been Phenomenal last few quarters and the commentary seems to be that origination trends are improving. Obviously, repayments are still a little bit We're muted.

Speaker 2

It seems like we could continue to see this path to growth. I'm just curious if And then just any thoughts around pushback from folks that might not want to see growth in today's environment and why you still feel good about adding that growth on these loans you booked largely last year.

Speaker 3

Yes. Thank you. Thank you, Steven. Appreciate the question. And we are cautiously optimistic about our continued growth prospects and view that as a very We have opportunity.

Speaker 3

We're being very conservative on credit quality. We're very focused on that. We've got a long tradition and track record of that. So We believe in this more challenging environment and the ability to be very conservative in what we're doing that we're putting on Really great quality, new assets and getting paid well for it. So we view it as a very opportunistic time for growth.

Speaker 3

We're achieving better diversification in our portfolio, but the reality is Real Estate Specialties Group is still The largest loan generating unit, growth generating unit in our company and Brannen Hamlin is Closer to that than anybody in our company. So Brandon, since REFG is the big dog in the pack leading the growth, I'm going to let you take the rest of that question.

Speaker 4

Sure, George. Happy to do that. And Stephen, thanks again for the question. Yes. I'll just tag on what George said about our absolute confidence in the quality of the credits that we're adding today.

Speaker 4

We're in the market every day through cycles and really always sort of pushing Leverage down and pricing up as the market gives us opportunity to do that. And certainly, The market that we're in today has done that. If you look at what we've closed more recently as Some of the uncertainty in the market has increased. You absolutely see our new closing loan to values and loan to costs being Lower than our portfolio average and pricing spreads strong quarter to quarter. So, feel great about the quality of what's going on.

Speaker 4

And in terms of the opportunity, There are still a lot of deals that are coming to the market. There are some that have stepped back as we've talked about in previous quarters. But our guys just do a phenomenal job and have over the years and built such great market penetration on the origination side and such Absolutely outstanding servicing on the asset management side that we get continue to get a lot of repeat business from really Super sponsors with great projects. And as I said before, a lot of capital in these deals with our loan Costs on average being lower currently in this market. So great job by the guys continuing to Stay in the market and of course working with a lot of sponsors that have seen our execution and the word gets around and we've got new ones available as well.

Speaker 4

And along with that, there's obviously, as you read the paper, there are a lot of banks That are pulled back and not giving us as much competition in certain cases as we might otherwise have. So A number of factors involved, but we have an opportunity to put some really great quality low leverage Well priced credits on the book and we're going to keep doing that.

Speaker 2

Yes, That's great color. Appreciate the commentary about improving quality. So if we if I for one take Growth is maybe a bit of a given and think you'll have nice growth trends in the back half of this year and next year. I appreciate the commentary around the NIM and that that will face pressure on the funding side. And I know the commentary, I guess, was NII growth was uncertain maybe, I forget the exact verbiage used, but it feels like that would still need to be pressured higher given the How you need to fund up this ramping growth?

Speaker 2

How can I think about

Speaker 3

that? Yes. That's a great question, Stephen. And really, There's a trade off coming between Growth and margin to determine whether we can continue to put up positive net interest income We hope we can. We are working to make that happen.

Speaker 3

But As we've said from, gosh, April of last year when right after Fed started raising rates. We made the comment that our variable rate loans would move quickly As the Fed raised rates, deposit cost would lag and we've said for a number of quarters now well over a year that Deposit cost would begin to catch up with The increases in loan yields when the Fed neared or reached the end of their tightening cycle, and we saw that in this Last quarter when our NIM gave back some of that 100 basis point plus of NIM expansion that we saw Over the prior quarters, when the loan yields were reacting faster than deposit costs. So there's a catch up And we're having to be pretty aggressive on deposit costs because we have such tremendous growth We want to continue those growth opportunities, but to achieve The kind of deposit growth that we're achieving, we're having to be moderately aggressive on those rates, and we can afford to do that. We have Probably the best net interest margin of our entire peer group by far. So we can afford to do that and we're getting really good yields So as Brandon mentioned, on the loan side, so we can afford to do that and we're doing that.

Speaker 3

But that will put a little pressure on our NIM And we've said for a couple of quarters now that the challenge is going to be to keep net interest income growing. We're going to have less NIM. We're going to have more average earning assets because of the growth and how that plays out Uncertain if we get really good growth and do a good job of mitigating the impact on our NIM, We'll have slightly positive net interest income numbers. And if we get a little less growth and do a little less good I'm on mitigating the NIM pressure. We could be flat to down a little bit on the net interest income.

Speaker 3

So it's horse race.

Speaker 2

Got it. Great color. Based on the track record, I'm betting on NII growth. So appreciate all the commentary.

Speaker 3

All right. Thanks, man. Appreciate it.

Operator

Thank you, Stephen. One moment for our next question. And our next question comes from the line of Matt Olney With Stephens, your line is now open.

Speaker 5

Great. Thanks. Good morning. I want to ask some questions around credit. It sounds like there were 2 loans that were downgraded this quarter as a result of some of those new appraisal values that you disclosed.

Speaker 5

I assume you've approached these borrowers to ask for additional equity since you've gotten those appraisals back. If so, any color on these conversations with the borrowers?

Speaker 3

Yes. What I would tell you on that is both borrowers Working very constructively with us. Both were already engaged And processes of bringing new capital to those transactions, so we're monitoring that closely. We are pretty confident in both these borrowers' ability to Get something done that will be useful to them and useful to us in that regard. These guys have shown Real commitment to these assets and we hope and expect that will continue.

Speaker 5

Okay. Appreciate the color.

Speaker 3

Brandon, do you have any color you want to add on those 2 deals?

Speaker 4

Well, I would just echo what you're saying, George. I mean, they were Pre engaged in those activities and making real tangible progress. We've done a lot of business really with the sponsors in both cases on these projects. So We feel good about the direction those are going and would hope to reflect that in the numbers next quarter.

Speaker 3

Matt, I would point out and Brandon can give you the details on this, but The equity on the Landale has posted a substantial reserve account To continue to carry this asset while they're working on the recap. And Brandon, you might you know the details. Yes.

Speaker 4

Yes, yes. So that's Matt, that's on the land deal that's at 95%, and They have $11,000,000 cash reserve there that's additional support for that credit. It's not included in the LTV, but additional support for it Cash reserves for carry and so forth. So and this is a sponsor there that very prolific developer, national footprint, Great reputation for developing successful projects. We financed, as I said, a number of their projects.

Speaker 4

And Good thing to call out there, George. And in the other case, Dollars have been coming in. Historically, that sponsor has put in that We did an extension. And in this case, I'm talking about the Hotel Matt at 101%. But during COVID, They put up additional capital and we did an extension then and they've continued to fund operating shortfalls and debt service.

Speaker 4

So a Significant capital, already ongoing capital infusion in that project. So those are not so much hope cards as historic performance that we're we have good expectations of the outcomes there.

Speaker 3

And I would add on the hotel, this is a really nice smaller asset and It's performing at or above the comps that in the market. This is just a Midwestern market that has been Really slow to come back from the pandemic and the changes in travel The quality of the asset there as well as the sponsors' proven commitment gives us a fair degree of confidence And cautious optimism about the path forward.

Speaker 5

Okay. Appreciate the detail. And then just digging a little bit more, I guess, On the topic, you've been disclosing these updated appraisals now with RESG for a while now and typically the LTVs Have more limited movement post appraisal. These 2 obviously have been outliers. Anything else unique about these transactions and these properties that would have driven a more significant Value deterioration than other ones we've seen in not just this quarter, but in past years as well?

Speaker 3

What I would comment and Brandon might want to add something to this, but land appraisals tend to have a lot of Variability to the valuation conclusions from land appraisals. And I'll Give you an example, you might have a land appraisal that has a $300,000,000 terminal value. You get a new appraisal on it And the terminal value is still $300,000,000 but land appraisals are done on a discounted net present value basis. So if the Discount rate on that because the Fed's moved 500 basis points, the discount rate on that goes up another 500 basis Points from, say, 12% to 17% and the holding period gets extended from 3 years to 8 years, You have a massive contraction in value that has nothing to do with the terminal value of the land asset. It's simply a function of the higher discount rate and the elongated holding period.

Speaker 3

And so we've been doing this a long time. So we've seen these land values fluctuate up and down Because of those conditions, what I would tell you is most The land we finance, Matt, is kind of a bridge to a near term vertical development. We do very few deals that are intended to be long term land holes when we go into them. So You noticed land going the other direction on that appraisal list as well where the loan to values went down, and I'm not sure of the specifics of those, but in some situations, the holding period to Actually shortens and the land value, the loan value gets better. So don't get Too excited about some of these variations in land values just because if you look at the math, you realize they're saying an 8 year holding period, that's Probably on the long side reflecting current economic uncertainty as you get on the other side of a recession, those values tend to come back Really quickly, and that's what the equity guys are looking at is what's the reality of that.

Speaker 3

The other thing I would tell you is we're keeping the valuations on this portfolio Pretty closely considered, while we had, I think it was 15 or 16 assets reappraised last quarter, we had 22 payoff and new loans Going on, so if you look at kind of the inflows and outflows of deals, we probably have fresh Values either on new loans and old loans paid off are reappraisals on something approaching 10 The portfolio every quarter, so these values are staying pretty freshly updated on the portfolio.

Speaker 5

Okay. Thanks, guys.

Operator

Thank you, Matt. One moment for our next question, please. And our next question comes from the line of Manan Gosselin with Morgan Stanley, your line is now open.

Speaker 6

Hey, good morning. I just wanted to follow-up on that last Comment there. So if it's about 10% of the portfolio comes out for reappraisal every quarter, is it fair to say about 40% of the portfolio has been re appraised over the last 12 months?

Speaker 3

Well, Manon has either been re appraised or had New appraisals because they're new loans originated. So I would say that's a rough estimate. I haven't actually calculated that, but I would say that's a fair approximation. As I mentioned, we had 22 loans pay off and the quarter just ended and I don't know exactly how many were originated, but it was probably somewhere in the same range of that. New loans have new appraisals and the old appraisals, the old loans go off and we're reappraising a dozen, 15 to 18 that just come up for Extension renewal or otherwise show some signs of concern.

Speaker 3

If an asset is If we think there's a likely movement in the value and performance of that asset, it's getting reappraised.

Speaker 4

Or I might add, George, there's an opportunity. Good things are happening at the project and There's some reason that we might consider an upsize of the loan. And of course, anytime we do that, we get a new appraisal as well. So There are positive activity reasons for that to happen.

Speaker 6

So, then maybe a big picture question on downgrades in general and not specifically related to those transactions. But you clearly get a lot of repeat business, so you have a great relationships with these sponsors. Could you walk us through other deals where you've had success Bringing in equity and I guess what you had to bring into that deal, right? So is it just a concession on spreads? Is it Reupping the loan or is there anything else that goes into that negotiation?

Speaker 3

Well, we had several Loans in the last quarter that were on that reappraisal list, because they were up for a renewal extension That the sponsors brought substantial equity. Brandon, you might be able to recap those. And I don't think we gave any Concessions on any of them, we probably improved our economics and terms on those, But did get pay downs. And Brandon, you have the recap.

Speaker 4

Sure, sure. It's a great question. And yes, most of these are going to have they're going to have better terms in addition to just in the quarter Just ended, I can think of 4 different situations where we extend the loan and got material pay downs, one $20,000,000 on a multifamily project in Philadelphia, one for $10,000,000 on a multifamily project in Oakland. We had another project in Oakland that actually You know, curtailed the loan, didn't need the full loan amount. So it wasn't a pay down, but a curtailment.

Speaker 4

And then we had another Midwest Hotel that we had a $5,000,000 pay down on and there were others in Q1 and right before Q1 ended, we had $54,000,000 pay down on a mixed use project, so just to name a few.

Speaker 3

Yes. So we're as we get appraisals that indicate higher loan to values and I know one of the loans that is in that list of reappraisals, we got the appraisal early, the loans coming up for This quarter, we got the appraisal early, so the higher loan to value reflects the new appraisal versus the current balance of the loan, but we would expect a several $1,000,000 pay down on that loan in connection with the Extension of the line. And we're granting the guys extensions an additional time. We're improving the economics on the deal in most cases as well as that. So Keeping the risk in check by getting the curtailments and improving the economics of the transaction at the same time.

Speaker 6

Got it. That's helpful. So as I think about the yield on loans, The 8.4%, 8.5% or so that you have right now, if we do get one as we do get one more rate hike from the Fed, So how should we think about those yields? Should they peak somewhere around 875% or based on the fact that you're getting some better economics on certain deals that There is additional repricing that we're not taking into account?

Speaker 3

Well, obviously, if the Fed continues to raise rates, We'll get that will translate through into loan yields. The vast majority of our loans are Variable rate, Tim, you probably have that number exactly. What is it? Yes, 79% of our variable rate loans and most of those are just monthly. So a 25 basis point movement in the fed funds target rate, but as a comparable movement in sulfur and prime, which it probably would, you would get about 20 basis points of that, but or 18 or 20 basis points of that would translate through into improved Loan yields from the impact of that Fed rate increase.

Speaker 6

Right. But is there anything beyond that as well That you could get from some of these renegotiations or some of the lagging repricing of the remaining 20% that are Not variable rate?

Speaker 3

Yes. In some cases, clearly, we are getting better economics On those transactions, but that's a small number of loans That are being dealt with there. So is that a basis point or 2 or it's not going to move the needle a ton. That's sort of just some of that pluses and minuses as it goes into the normal wash of those loan yields.

Speaker 6

Got it. Thank you.

Speaker 3

Thank you.

Operator

Thank you, Manon. One moment for our next question. And the next question comes from the line of Catherine Mealor with KBW. Your line is now open.

Speaker 7

Thanks. Good morning. I just had a couple of follow-up questions on the credit discussion. Maybe question 1 is just what market Yes. I know you said that the hotel loan was in the Midwest market.

Speaker 7

And can you tell us the market that the land loan is in? And then my second question on those projects was, did we see any Increase in the specific reserve related to those two downgrades?

Speaker 3

The land loans in Chicago And obviously, we hold higher levels of reserves For loans that are special mentioned and pass and higher levels of reserves are substandard as opposed to Special mention. So yes, the reserves went up on those loans in connection with the change in risk rating.

Speaker 7

And I appreciate your commentary, George, about just the pace at which you get new appraisals. It feels like you're mostly getting new appraisals either at maturity Or an extension or if you see degradation in the project for some reason. So is there can you maybe just kind of help us think through that? And particularly in the land portfolio, how much of that book do you feel like has an updated appraisal? And is there risk within just that book that we could see as we move through this process just Additional appraisals that are going to kind of increase the LTV significantly, it's just that land book?

Speaker 3

Yes. Well, your first premise is Correct. Your understanding is correct. We typically get appraisals obviously on new loans and then at maturities, extensions or If an issue arises that makes us think we need to get a new appraisal to kind of Recalibrate our valuation on a loan. So that keeps our appraisal services guys and our outside appraisers Pretty busy doing all of that workload.

Speaker 3

As I mentioned, Catherine, I think it's really important to know that If you look at the figure in the management comments that shows distribution The land loans are kind of down there on the far right. It's like Most of those land loans are done as really a bridge to a vertical construction. So we're doing a lot of times a 12 month Land loan with a couple of 6 month extensions to give the sponsors who are Acquiring feasible hand time to complete their plans, specs and cost out Get ready to close into a vertical development loan. So those tend to be pretty short term, short duration assets that really Put us on the inside track to do the vertical construction on those loans. And as I mentioned, there are very few Landhold loans, now the asset that we've dealt with a quarter or 2 ago, The land out in California, that was a land track that was scheduled for vertical development And that ended up being a land hold instead because their cost just blew out.

Speaker 3

That's a fairly unusual But that will occur now and again. And other than those sort of situations and Maybe a couple of landhold loans. I think that portfolio is well margined and will perform Very well. There might be an occasional bump here and there and we've seen that, but I'm not worried about that having a material impact on asset quality.

Speaker 7

And what was the question? George, I

Speaker 4

might just add to that, Catherine. I'd circle back to your question. I mean, because of what George said, You're going to have a more current currently appraised portfolio in land. I don't know the numbers, but I'm going to say the majority of that Portfolio has valuations that are a year or less old because of the short terms that George alluded to. So just to kind of circle all the way back to your question on timing of appraisals, it stays pretty tight on land.

Speaker 4

And in that figure that George pointed out, it's our lowest loan to value property type.

Speaker 7

Great. Okay. Yes, that's helpful. And on that Chicago project, what was the emphasis to needing a new appraisal for that loan?

Speaker 4

Brandon, you want to take that? I'm sorry, I didn't understand the question, Catherine.

Speaker 7

So why did you need to get a new appraisal on that Was it degradation? Was it did it come to maturity? Or what was Yes.

Speaker 4

It was in connection with an extension loan maturity.

Operator

Okay, great.

Speaker 7

And then one other question just on the growth outlook. I just wanted to make sure that I'm thinking about Right. So I think you mentioned in the management comments that you think origination volumes are going to be closer to 20 11 Levels, which was about $8,000,000,000 And if I do the math, that's putting your origination volumes Well over $2,000,000,000 for the next couple of quarters. Am I thinking about that right?

Speaker 3

2021, not The 2011.

Speaker 7

Excuse me, 2021. Yes.

Speaker 2

Thank you.

Speaker 3

I knew what you meant and you knew what you meant, but I didn't want others to be scrambling back through the historical archives.

Speaker 8

We've been

Speaker 7

doing this a long time.

Speaker 3

Yes. We had previously said we expected the number to be In the range of 2020 to 2021, which is kind of in round numbers, we run off a $6,500,000,000 to $8,000,000,000 The thrust of that comment is we now think we're Coming in at the high end and a little over probably the high end of that range by the end of the year based on the pipelines we're seeing. So We didn't want to surprise anybody with that. We wanted to raise the possibility that We may be at or somewhat above that $7,940,000,000 level of 20

Speaker 7

21. Great. So a pretty big acceleration in the back half of the year.

Speaker 2

Got it.

Speaker 7

And then It also felt like you were saying repayments should also increase some in the back half of the year as well.

Speaker 3

Repayments, I don't know. That's going Pretty slow. So we had indicated, I think that around the 'twenty one, 'twenty two level and We cited you to a 5 year average that's slightly below the low side of that. So I think we're expecting More prepayments to slide into next year and because of the fact that A lot of sponsors for the last several quarters have really been sort of slow playing. They're bringing forward projects for development in a lot of cases that they've been working on for quite a while.

Speaker 3

I think As folks are thinking, the Fed's getting near the end of the tightening cycle. They're getting a little more clarity at the sponsorship level On how a lot of these markets are playing out, our sense is that a lot of Sponsors on certain transactions in certain markets are saying, okay, we've got enough clarity About how the economy and the market is playing out and where the terminal interest rates are likely to be to decide the economics of this still makes sense We're ready to move forward. There was a lot of uncertainty about how far the Fed was going and how much impact that was going to Have on the economy and different product types and so forth. And I think there's A, a little more certainty for some sponsors on some projects and that's not broad based all sponsors, all projects, but Some sponsors on some projects in certain markets seem to be getting a little more clarity. And at the same time, as Brandon mentioned earlier, competition has Reduced, particularly in the bank space.

Speaker 3

So We're getting probably a little bit bigger piece of the pie and pie, maybe a little bigger now than we thought it would be 90 days ago Just because folks are getting a little more confidence about where everything sort of settles out at the end.

Speaker 7

Great. Makes sense. All right. Thank you.

Operator

Thank you, Catherine. One moment for our next question. And our next question comes from the line of Tamir Braziler with Wells Fargo. Your line is now open.

Speaker 9

Hi, good morning. Thanks for the question. Good morning. Maybe starting on the funding side, Just looking at the deposit base, do you think the rates where you have them right now are sufficient in providing Funding and kind of getting all the deposits that you need? Or is there still some needed acceleration in kind of fine tuning your offering in order to get

Speaker 3

We've been at the same rate level the last few weeks and volume inflow volumes Seem to be holding up really well at those levels. So, Timur, there may be a tweak here and there or The Fed action potentially next week could cause folks to move a little bit, but where we are today, we feel good about.

Speaker 9

Okay. And then I guess as you look at funding kind of the near term loan growth, Deposit growth is actually quite strong this quarter. Cash balances increased. You have some bonds that are coming due over the next 12 months. How should we think about funding loan growth here over the next kind of 2 to 3 quarters?

Speaker 9

Is there going to be as much an impetus in growing deposits or are there Some other levers you can pull in funding from this near term loan growth?

Speaker 3

Absolutely, continuing a very strong focus on deposit growth. I'll tell you Cindy, Adi, Kerley, Drew Arper, Dan Hart, Dan Roulette, Just our 15 hundred, 1800 people and our 2 40 retail banking offices in 5 states Did an incredibly good job of growing deposits. We had a big deposit growth quarter. We expect That to continue. If loans grow 1,000,000,000 $5,000,000,000 or $1,000,000,000 in a quarter.

Speaker 3

We're going to expect deposits to grow a little more than loan growth. So we would expect that To stay the same and hopefully we'll be able to maintain roughly the same mix of deposits. We've been able to do this with Mostly organically, locally generated deposits, growing our customer base significantly, and We've not really increased in percentage terms as a percentage of deposits in any material respect. Our Reliance on brokered deposits over the last several quarters or anything, we stayed in that mid to high 9% of deposits there, and We hope to continue that. We've got clearly flexibility to increase that if we needed to, but We like growing the organic local deposits through our branches, and we're having really good success with that.

Speaker 9

Okay. And then if we can take out the crystal ball and kind of fast forward into the back end of 2024, Just given the funding schedule for RESG and that pace that that's at, let's say, the Fed starts cutting rates in the back end of 'twenty four, Are deposit costs going to fall commensurately with the Fed cuts or is there going to be a lag on the way down As there remains some funding constraints from the increased production activity.

Speaker 3

Well, clearly, as deposit The cost lag on the way down and that's just going to be reflective of the fact that Most of the CD deposits we have, have 4 to 13 month terms. That's sort of

Speaker 10

the

Speaker 3

range of where the vast majority of them are. So Those deposit costs will Tend to lag a bit on the

Speaker 5

way down.

Speaker 9

Okay. And then just last

Speaker 3

for me, maybe It was Fun with them lagging when it was going up. It will be less fun with them lagging when rates are coming down. The trick to that is to do a good job getting floors set in our loans that will mitigate Somewhat the ramp down in our loan rates as the Fed starts cutting. Now That's a negotiating challenge in every loan and it's becoming more difficult to negotiate as Sponsors think more about a future where rates are lower rather than higher. So that's a big part of the strategy and we've had good success Mitigating the impact of declining rates, slowing that decline of rates on the loan yields down So that it gives us a little room to maintain and protect our margin.

Speaker 9

Got it. Thanks for that. And then just lastly for me, maybe circling back to credit. Can you provide the allowance that you currently have on the loan book? And then I'm wondering, we saw the California land deal last quarter where the sponsor kind of bought that developing in this environment.

Speaker 9

If that type of activity starts to accelerate, given the expectation for recession at some point in the future, Does that inherently increase the allowance that's allocated to the loan book or to the land book?

Speaker 3

Well, Tim, I'm going to let you start off and then I'll add a little color at the end maybe. Tamira, was your question what is the allocation of ACL to the land book or the loan book?

Speaker 9

The land book.

Speaker 3

Yes, I don't have that number Right here, this probably is a good opportunity to talk about our overall ACL. We added A new chart in there, talking about the bill that we've had in our ACL over the last four quarters, Growing the dollar amount by $127,000,000 when our Cumulative net charge offs were only $23,000,000 over that same period and also the percentage has gone up during that time period as well. That reflects, obviously, our loan growth during that time period, substantial loan growth during that time period And obviously, our cautious outlook on the economy during that time period and the uncertainties that are still present. Overall, from an ACL perspective, we Feel like we're in a good position there. I don't have the specific allocation to that land book in front of me.

Speaker 3

And Tamura, your question about if I think you asked the question if we have A recession, will that result in further increases, will we need to Build our allowance more for that. And that remains to be seen, obviously, what's the Severity and the duration of the recession and how does it impact different parts of our portfolio. But We think we've been pretty cautious in our approach on this. And as we've noted in our management comments Every quarter for the last 5 or 6, our scenario selection has been weighted Predominantly to the downside scenario, it's either the Moody's S-four scenario, which is their I can't remember exactly what they call it. What is it, Tim, adverse?

Speaker 3

Yes, alternative adverse scenario. Alternative adverse scenario. That's sort of their downside recession scenario and then their S6 scenario, that's the stagflation Scenario. So that's been the majority of our weighting. And I think that's why you've You know, seeing us have significant provisions over and above what we would have for growth Every quarter, even as our charge offs have been pretty benign there.

Speaker 3

So we've been modeling for the recession, which has proved to be very elusive and that's no Anybody, I mean, everybody on all the business talk shows is the recession is always going to happen in a couple of quarters and a couple of quarters and a couple of quarters, and We've been talking about this for a year and a half now, and it hasn't materialized And may not materialize, may materialize. That's above my pay grade. But we think we're well positioned from an ACL point of view for A pretty cautiously selected series of outcomes.

Speaker 9

Great. Thanks for that.

Operator

Thank you, Tamir. One moment for our next question, please. And the next question will come from the line of Michael Rose with Raymond James. Your line is now open.

Speaker 11

Hey, good morning, everyone. I thought I'd start off with a non credit or margin question. In the management comments you guys talked about, additional people that you're going to add, to benefit to growth in coming quarters. Can you just give us a sense for kind of what areas you're looking to add in? And understand the guidance for this year, but would that hiring kind of And into next year to support what looks to be pretty strong growth.

Speaker 11

Thanks.

Speaker 3

Thank you, Michael. I I appreciate the focus there. And one of the long History and traditions of our company is to be well capitalized, have ample liquidity, have a great management team And be able to capitalize on opportunities in times of economic challenge and turmoil. And You've followed us for a number of years and a number of the folks on the call have seen us really be very opportunistic and capitalize on opportunities to capitalize on and certainly our opportunities that Brandon has mentioned already on The loan side to capture market share and lower leverage and increase margins on loans is an opportunity that's Being very good to us in the current economic times, the fact that a lot of our Competitors are shrinking and laying off some really good people or curtailing the business plans of some really good people. I think it's going to give us the opportunity to make some nice additions of talent Across different business lines in our company to grow and expand those, acquire People who have a different set of customer relations than we currently have, which in the long run It will hopefully allow us to expand our customer base in a material way.

Speaker 3

So Without getting specific, I would tell you right now, we're looking at probably 10 or so people that we would really like to add that are across 3 or 4 different lines of business. And We hope to bring some of those guys on board. They would be and they're men and women. They would be very nice augmentations To the robust pool of talent we already have and I think talent is going to be One of the most important factors for companies going forward and we're doing more work To recruit and retain, improve the quality of recruits and retain our existing high quality talent than probably ever before. And I'm spending a lot of time on this, Sandy Wolf and others are spending a lot of time on it.

Speaker 3

But the U. S. Workforce is Aging, the mindsets regarding hours of work and the trade off between hours Work and leisure hours and family hours and recreational hours has been probably forever changed by the pandemic, Mindsets that 4 years ago, we would have ascribed to a younger generation of workers who have been adopted by The more senior members of the workforce and Our educational system in the U. S. Is not what it once was, so we're not turning out as many high quality workers As a percent of the population as we were before, all of those factors suggest that there is going to be A very challenging environment to recruit and retain talent in the long run, and we are keenly focused on that.

Speaker 3

So if we can pick up 10, 20, 30, 50 people over the next year that are not happy or no longer with A competitor and their high quality people that really have a long term value in place in our company, I think that's a huge opportunity. So we're keenly focused on capitalizing on that.

Speaker 11

Okay, perfect. Maybe just going back to some comments in the management document. You talked about slower loan repayments in the current environment. So it sounds like and I think what we've read about, right, is that the permanent market for these loans is Pretty much closed. You guys have a lot of unfunded commitments that will fund up in strong growth as you've talked about.

Speaker 11

Do you see this as an issue? On the one hand, obviously, it's good that those loans stick around, you get a little bit more kind of NII, but it would put some pressure on capital levels. Just Help us think about how these dynamics will play out over the next year or 2. Thanks.

Speaker 3

Yes. Well, I would say that Anyone that tells you that the markets permanent loan markets are closed is exaggerating or Hyperbolic in that statement, as I mentioned, we had 22 loans pay off and go permanent Last quarter, so the markets are not closed and Our repayments in Q2, I think, were a little above our repayments in Q1, where they came about $100,000,000 or so. The markets are not closed and those markets just like our sponsors who are getting a little more settled now knowing Thinking that I've got a clear view of where all the Fed The rate hikes are going to end and the impact of the economy, whether that's going to looks like it's a little clearer than it was 6 months or 3 months or 9 months ago. I think the same is true in the secondary market. Now the reality is A lot of our sponsors look at the secondary market and they think, well, that's not the right I want to refinance into.

Speaker 3

So I'm going to see if I can stick with OCK another 12 months or 6 months and Improve the performance of my project another degree and maybe Rach will come down and I can get a better exit scenario. So we don't really view this as a Problem, we're happy to have these books, these assets on the books longer term at our leverage. Bear in mind, The permanent loans that take us out are usually a substantially larger loan, sometimes 150%, 200%, 225% of our loan amount. So we're quite happy to Keep these assets on our books, at our rates, at our leverage for a while longer into the future. So we view this an opportunity, Not a downside.

Speaker 11

All right. Thanks for taking my questions.

Operator

Thank you, Michael. One moment for our next question please. And our next question will come from the line of Brian Martin with Janney Montgomery Scott. Your line is now open.

Speaker 8

Hey, good morning, guys.

Speaker 3

Good morning, Brian.

Speaker 8

Just a couple of follow ups for me. Just on kind of the reserve build maybe for Tim. Just Given kind of where you've gone, come from maybe an 85 basis point level to 95 over the last four quarters, I guess, are you feeling you're kind of at a point now where you don't need to continue to kind of build that reserve, given your outlook? Or should we expect There's more of that to come, just given your cautious outlook and the outlook for loan growth.

Speaker 3

Yes, Brian, I mean, there's just too many factors to really predict that at this point. Clearly, it's At each quarter end, we've got to look at the macro environment at that time and determine the appropriate Provision in ACL, given those given the current environment. So naturally, if the environment And the uncertainties are improving, then you would expect a lower level of provision. But if there's still the same amount of uncertainties or worse than the current amount, then you would expect the provision Go higher or at similar levels to what we've got now. So just too many factors to predict What that provision will be in future quarters at this point.

Speaker 8

Got you. Okay. And then maybe just on the expense outlook, I think George talked about the hiring, potentially what could happen. I mean the expense rate this year is a pretty lofty level Given what's hired as far as the people you've added, I mean, does the expense growth rate, should that come down next year Relative to this year, even with the additional hiring or just kind of high level, how should we think about the rate of expense growth as you get into 2024, given What you just mentioned as far as opportunities to add some talent?

Speaker 3

Yes, certainly, you saw our comments on the mid to high Teens for this year, 2023 versus 2022 full year. This year, we obviously have The new FDIC assessment that came into effect, 1.1, we're likely to have a special Assessment this year, so our guidance there does not contemplate any sort of special assessments. But in addition, This year, we've had elevated levels of advertising and marketing. We would expect those to continue Throughout this year and likely throughout next year as well. The level of headcount depend on the opportunities.

Speaker 3

Obviously, we were at really Diminished levels starting into last year. We've had great success on hiring great talent. I think our headcount is up 10% year over year. We've had obviously really strong levels of compensation increases to George's point to retain our top talent. So I could see the level of increase, Percentage of increase decreasing next year compared to our 2023 level, Too early to tell or give any sort of thoughts there, but the mid we wouldn't expect the mid to high teens percentage to be A run rate for an extended period of time unless we find just compelling Opportunities to add additional headcount.

Speaker 3

Yes. I would add to what Tim said and agree with all that, Brian, but I would add the Our growth rate next year is going to be a significant factor in that. Obviously, if We grow our balance sheet 15% or 20%, then we're going to have to add headcount Commensurate with that, and I'm not saying we'll grow at 15% or 20%, but if it grows 10%, you're going to have one level of headcount. If it grows 15 or 20, you're going to have another level of headcount additions. And we are likely to start Scattering some new branches into our network of branches.

Speaker 3

We're at 240 retail banking offices today and You've been a long time follower of our company and we've talked for years about the tremendous capacity we have in those branches And you guys have seen that play out right before your eyes over Recent quarters, but we're also looking forward 3, 4, 5 years down the road at What our franchise and balance sheet looks like then and the size of that balance sheet and the funding needs of that balance sheet, and we're going to need To add some more branch infrastructure starting really now, Starting later this year and into next year to provide the additional customer connectivity We're going to need to be able to support our growth 3 to 5 years out. So you will see a handful of branches, I don't know whether 5 or 8 or 10 added in next year, but that will add a little bit to our operating cost. But again, that's going to be offset by growth and that's going to be a critical part of our long term strategic plan to Make sure that we've got the branch infrastructure and the customer connectivity and convenience factors They continue to support our balance sheet growth many years into the future.

Speaker 8

Got you. I appreciate that. That's helpful. And Maybe just one final one. Just do I don't know whether it's Tim or Cindy or Hooman, would you have kind of where the spot rate was on the cost of deposits in the margin for the end of the quarter?

Speaker 3

Sandy, you want to take that?

Speaker 7

I do. So June cost of interest Fearing deposits was 3.11 percent compared to the quarter of 3.12.

Speaker 8

I got you. Okay. And then on the margin?

Speaker 3

We don't give that number and We've got that number internally, but that margin tends to bounce around quarter month to month within the quarters. We don't typically disclose those margin numbers, but Cindy gave you a good cost of interest bearing deposit number for June.

Speaker 8

Yes. Okay. And then just maybe just trying to just on the margins kind of from a high level view, just trying to I appreciate the comments about the NII and just kind of focus on That being worth it, just trying to understand maybe where the margin, given the lag you talked about, George, on the deposit side, When that might trough, if the Fed does pause here after the next meeting. The lag is it a couple of quarter lags, so we should be thinking about the margin Percentage troughing, all else equal in the near term and the Q1, kind of 4th or Q1, is that fair?

Speaker 3

There are a lot of variables in that. One is, I think given the fact that a lot of our deposits Run out as far as 13 months, you're probably looking at several quarters of Blair, on the deposit side, before if Fed stops and then starts cutting, It takes several quarters to work through those deposits. The other thing is how long are we at current rates Before the Fed starts cutting. So if we're at if the Fed raises one more time or 2 more times And then stays there throughout much of next year. We're going to have a really effective Time at getting a lot of floor rates reset to the top near the top of the market levels, which will give us a lot of Protection to our margin is rates fall, Even as deposit rates lag coming down.

Speaker 3

On the other hand, if Fed goes to a peak terminal number and then A month or 2 later starts cutting rates, that's going to be harder to get our floor set Reset. So we were very pleased to see the Fed take a pause and maybe extend the pace of this last cut or 2 out over a slower period of time because that's very beneficial in helping us get old Loans with really low floor rates roll off the books and new loans with floor rates at or near current origination rates on the books. So that's really helpful. So we would our best scenario is FedRaces once or twice more and then stays there for a year, Which is probably really good to help Fed accomplish their actually getting inflation under control and not Reigniting inflationary pressures and that's a perfect scenario for us from a margin point of view.

Speaker 8

Got you. And under that scenario, George, would it is that trough in early late Q4, early Q1 kind of realistic Given those dynamics, if the Fed doesn't start cutting until second half or late next year?

Speaker 3

Well, let me just leave you with the concepts, I'll let you figure out where the trough is. We've got a we run, gosh, between 2 and 3 dozen interest rate models In various scenarios every month. And where the trough is in rates just Depends on which set of model assumptions you've got. So let me give you I'll kind of give you those color comment points and let you Run your own models and see where you think the trough should be because I could give you an answer any quarter and it would match one of our models

Speaker 8

Perfect. I appreciate the color, George. Thank you.

Speaker 3

All right. Thank you.

Operator

Thank you, Brian. One moment for our next question. And our next question comes from the line of Brody Preston with UBS. Your line is now open.

Speaker 10

Hey, good morning, everyone. How are you?

Speaker 3

Good morning.

Speaker 10

I wanted to maybe just circle back to I've got some credit question, but I just wanted to maybe focus on capital So you obviously bought back a decent amount of stock this quarter, but the difference between I think 30 $3.43 is quite a bit on the stock price. So I guess and your CET1 ratio is now, I think it's 10.8 and it was 13.3 last quarter. And so I guess, is it kind of safe to assume if we hung out at these levels On buyback that we shouldn't be making a much more buyback into our estimates, just given the growth outlook Remains pretty solid, and so you're going to want to preserve that capital for balance sheet growth.

Speaker 3

Hey, Brody, it's Tim. Yes, we gave you not only the average price that we Paid in the quarter just ended, we also gave you the average price for the 6 months. Obviously, There were compelling value opportunities there at those prices. We still have some authorization remaining. So at these levels though, I think We're going to focus on organic growth and preserving our capital for that.

Speaker 3

But if we do see additional compelling values in Our stock price, we won't hesitate to repurchase some more shares at those values.

Speaker 10

Got it. And then I did want to ask just And this is a little bit tangential to what you had talked about with discount rates, George. But I guess just given that the discount rates have moved up and these appraisals have been changing as a result, is there any relationship between the Discount rates and the reserves, just given the change in the LTV, like if discount rates were to fall next year, I guess, does the values get better on these projects and therefore the LTVs fall and therefore maybe you don't need to carry as much

Speaker 3

There's a degree of correlation between where interest Rates are and where discount rates are, but it's not a perfect correlation. So what I would tell you is if Your thesis is correct. If that correlation maintains at a very Positive level and interest rates fall and hence discount rates fall, then that should translate Through into better appraised values and lower loan to values. But again, that's not a Perfect correlation. And the second question you asked, does that have an impact on reserves?

Speaker 3

Yes. The Loan to value is one of many factors that compute into our risk rating models For loans, so higher loan to values result in a higher risk rating, lower loan to values, All other things being equal result in a lower risk rating for loans and those risk ratings are Correlated to an expected loss and a probability of default calculation on every loan And obviously, that has an effect on both those factors.

Speaker 10

Got it. Thank you for that. And I did want to just circle back to the credit discussion. And I feel like I get an education from you guys every time I get on these calls and we talk about RESG credits. But George, you said something as it relates to the values on these land loans.

Speaker 10

And just given how sensitive they are to discount rates And duration within that kind of NPV analysis on the value. So I guess, are you saying that With the land loan that went from a 40% LTV to a 95% LTV, that one in Chicago, Was there no change in the actual like end value of the project? It was just the NPV inputs Change to the present value of the project, am I understanding that correct?

Speaker 3

Brody, I was using my example as a hypothetical. I'm not sure in that particular loan. Brandon may know that if the terminal value changed or not, But I do know that not surprisingly, and this is probably going to be true of any land loan, That as a longer term hold sort of land loan where development is not imminent in the next 12 to 18 months, Your holding bridge is probably going to extend and your discount rates going up. Now, Brandon, I don't know Brandon may not even know if the terminal value is on that.

Speaker 4

I don't, George. Yes, no, I don't have it on top of my mind. But your point that longer periods and higher rates Tend to have more impact than changes on that terminal value ultimately in the valuation on our LTV.

Speaker 10

Okay. And so I guess would that be the explanation between and I guess I was particularly interested in the land on that table just because if You look at the top of that table and the bottom of that table, you got about 2 land loans about the same size, except one You know, from 40 to 95 and the other one actually went down from 46 to 25 or whatever. And so it was just A bit of a stark contrast. And to me, just from a layman's point of view, I said, well, maybe like the first one got delayed or the Projects been shelved, but the bottom one is going forward and, is really strong. I guess, like what drives that kind of dichotomy between those two loans?

Speaker 3

You're exactly right. And that go ahead, Brandon.

Speaker 4

Well, yes, Brody, it's a great question. And But these tracks of land are located in various markets across the country and there are very different dynamics that are in play in different markets. So in this case, If I'm not mistaken, you're probably looking at the bottom of the chart. I believe that's Track in Southern Florida. So dynamics are in expectations are a little bit different there than they are perhaps in Chicago and Certainly in other markets like San Francisco.

Speaker 4

So, look, it's hard to look at a chart like this And draw correlations, there are so many different factors at play In every single tract of land that you're valuing.

Speaker 3

But just to Take what Brandon said and apply it to your concept, if Brandon's right, that lower piece of land, if it is in fact in Florida, The pace and magnitude of development in Florida is speeding up in most cases, not Slowing down. So it would, to your point, a piece of land that's going to develop in 3 years now, it's going to go vertical in 18 months, that's going to improve the holding period discount on that track of land.

Speaker 10

Got it. Okay. And I guess

Speaker 9

And I guess

Speaker 3

Brandon's color is right.

Speaker 10

Got it. Okay. No, that's helpful, and makes sense. And I guess, if I could stay just on the land Topic, is it because when I look at the LTV changes in the other properties, right, I mean like some up, some down, They look fine. And like if I'm a developer, right, it's much easier for me to say to you guys, okay, like, yes, Like I'll definitely bring more equity to the table when I've already got like shovels in the ground and we've got 5 floors of a 10 floor building kind of built.

Speaker 10

But like the land loans seem like they might just I guess naturally be more at risk of LTV Changes, just because no developments actually happened yet. Is that a

Speaker 11

fair way to think about it?

Speaker 3

Yes, exactly. As we said, they're the most variable Pieces of our portfolio when it comes to variations in appraised value.

Speaker 10

Got it. So when you do these reappraisals On the land, and just whether or not the value is going up or down. I guess, what is do you guys have a sense for what the relative Success rate is that you've had over time in terms of you're working with strong sponsors. They probably got multiple projects with you. Maybe one of them is land at this point, maybe one of them is an Just building at another point, do you have a sense for kind of the success rate of kind of getting sponsors to commit more equity to a project Regardless of what phase it's in, just given the strength of the sponsor.

Speaker 10

So like they got a land loan with you, they're still willing to commit To more equity to you because they're a strong partner of yours or do they look at it differently like from an economic perspective maybe we need to commit less to this land Because we don't know how this is going to work out over the next few years. Like I'm just trying to understand the psychology of these developers.

Speaker 3

Well, first, I would tell you, as Brandon mentioned, We had 4 or 5 loans or more last quarter that we had reappraisals on where the sponsors either contributed additional curtailed loan amounts that kept the appraisals in line or closer Our original appraised value is on that. So we have a good track record Sponsors supporting their loans and the reason for that is, 1, we choose our sponsors Well, we try to choose them well and have capable sponsors and 2, we get so much equity in these. The weighted average RESG portfolio, I think at sixthirty was 53% of appraisal And our cost and 43% of appraisal. So at 53% loan to cost, You've got a lot of equity in there that They've got to protect and defend. So we have a fair amount of leverage to encourage the sponsors to continue to support Their asset.

Speaker 3

The other comment I would make on that is, I think our Weighted average RESG portfolio at March 31 was 43% and was 43% at June 30. So the Percentage of the portfolio changed. So we it was unchanged on a lumpy value basis. So we had some appraisals that were higher and some lower. We had loans pay off 22 of them.

Speaker 3

We had a bunch of new loans originated And the net effect of all that on a weighted average basis was an unchanged loan to value ratio. And I think that speaks to the high quality of the portfolio and the high quality low leverage of the New business we're originating.

Speaker 10

Got it. And this is my last one, George, just on this is, We're coming through proxies earlier this week. And one of the things I thought was interesting OZK is one of just 2 companies that I cover that includes a hard target NCO rate within their performance based comp Every year, interestingly, the other company also does differentiated forms of lending. And so I guess, To me, it says that you're telling your shareholders, hey, we do differentiated lending. We're really good at it.

Speaker 10

But we're aligning ourselves with you in terms of Trusting us on credit to actually get paid the way that we want to get paid. Is that kind of what you're trying to do? And then 2,

Speaker 3

why do

Speaker 10

you view that as important as you do? And then 3, why do you think other banks Don't necessarily target NCO rates within their comp when they're being trusted by their investors to underwrite loans as well.

Speaker 3

Well, we would never be presumptuous enough to try to explain why other banks do or don't do it, but I'm going to let Tim answer your Your other two questions. Hey, Brody. Yes. So in our annual short term incentive plan that All of our senior executives are part of. 3 of the components are financial related.

Speaker 3

We've got EPS, Efficiency ratio and NIM. The other 2, as you pointed out, one is net charge offs, the other is nonperforming assets. We've had a long standing track into ROA, ROE and total shareholder return. So we certainly feel like our incentive plans, both short and Long term are consistent and aligned with our shareholders. But Asset quality, we've got a long track record of beating industry averages on asset quality, and we incentivize Our team to maintain those industry leading levels.

Speaker 3

So, and that's been that way for a very long time.

Speaker 10

I guess, maybe if could sneak one more in.

Speaker 3

And Rob, I'll add one more piece of color to that. I talk with lenders and lending team recruits Almost every day and probably every day for 40 years, the guys have heard it. Asset quality is of paramount primary importance, goal number 1. Profitability margins are goal number 2 And growth is purely a tertiary concern. So we live that it is part of our culture, asset quality, Number 1, profit margin number 2 and gross and tertiary concern.

Speaker 3

So you saw a couple of years ago, our balance sheet grew Very little year to year, because competitors are out there being very aggressive on structure and leverage and very aggressive on pricing And growth is not a primary concern. So if we don't grow for a year or 2 and just stack up capital, That's okay. We're doing the right thing for the long run. We're sticking to the fundamentals. Now when you've got a situation where Valuations on assets are a bit beat up and competition is out of the market.

Speaker 3

We can get lower leverage On asset values that are already kind of adjusted to a more severe market and get paid better for doing that, We got a much, much better risk adjusted return. So we may grow a lot in an environment where we're getting High quality assets at good margin at values that are already stress tested compared to going out and trying to get a bunch of growth when everybody Growing and everybody is aggressive to grow. So we tend to be a little counter cyclical and I think it's why we've been Continuously profitable for 45 years. I mean, we pay attention to the fundamentals.

Speaker 10

Got it. And if I could maybe just sneak one last one in. I know we're running long. I just I did want to just ask, just given the Focus on asset quality, given that you're paid on charge offs. When I think about the differentiated nature of what you do, like I guess maybe could you give us some insight, I think you told me this at some point before, but just what's different about the way that you work out loans?

Speaker 10

Like when you identify a RESG loan that you think maybe needs a little bit of help, I guess early identification It's obviously pretty paramount, right, and strength of sponsor really matters. But is there something else that you're doing within the workout process that Uniquely kind of positions you to take less losses on what some might perceive to be a riskier kind of asset?

Speaker 3

Well, I would tell you that a great part of our success is the structure, the Documentation, the underwriting and the asset management that goes into those. So The structures you set up on the front end, your documentation and the effectiveness and effectualness of those structures It is critically important. So if you can identify where future weak points And a transaction may be long before those weak points, long before you've even closed the transaction And structure around those weak points, that's critically important. And then getting all that Committed in your documents and closed. And then the asset management team that Brandon and Clifton Hill and Wang and Tal, the other guys at RESG has built is just exceptional in their knowledge And monitoring of credits, they are we've got basically about one loan or about 14 loans assigned to every asset manager.

Speaker 3

Most of these asset managers are MBAs with a real estate focused MBA program. It's a highly talented, educated team and they've got really good tools Really good team leaders and really good group leaders over those teams, and they are monitoring these assets on a Daily basis, they see every in and out, every lease, every sales contract, every third party report. They're monitoring these things at a level that lets us know that issues are developing sometimes before the sponsors really They're focused on issues and being able to get ahead of things and fix them before they get big is very important And preserving and maintaining the asset quality of that portfolio. We used to have an incredible team, and it goes all the way from The originators and the underwriters and the managers over originations all the way through the credit and closing process And then all the way through the asset management process to pay off. We've had as our Slide deck, in 20 years, we've had losses on, I think, 6 or 7 RESG loans and We'll have a few losses here and there on our portfolio, but the job that our team does there is just very Helpful, critically important in maintaining the quality of that portfolio.

Speaker 10

Got it. Thank you very much for taking my questions, everyone. I really appreciate all the detail, George. Very thoughtful.

Operator

Thank you, Brody. And I'm currently showing no further questions at this time. I'd like to hand the conference to Mr. George Gleeson for closing remarks.

Speaker 3

Thank you guys for joining our call today. We're very proud of our quarterly results. Feel really good about it and very excited about talking to you again in 90 days. So thank you. Have a great day.

Speaker 3

That concludes our call.

Operator

This concludes the conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful

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Earnings Conference Call
Bank OZK Q2 2023
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