Bank OZK Q1 FY2025 earnings call

• Loan growth: First quarter had 3.8% loan growth, with expectations of continued growth in average earning assets throughout the year. - ESG origination: Uncertainty in ESG originations, but customers remain confident in real estate deals despite short-term uncertainty. - CIB developments: CIB business lines like ABLG, EFCS, Fund Finance have strong pipelines, a new Corporate Banking and Sponsor Finance group in expansion mode, and a natural resources group being launched. - NII: NIM was impacted by two fewer days in Q1, but COIBD was down 29 basis points. Expectations of record net interest income in future quarters. - Deposit costs: Cost of interest-bearing deposits decreased by 29 basis points in the quarter, with continued opportunities to decrease costs as time deposits mature. - Loan and property updates: Maryland land loan moved to substandard accrual, Chicago land project has potential but is complex, and updates on other OREO properties.

The company's segments include Real Estate Securitization Group (RESG) and Corporate and Institutional Banking (CIB). In Q1, total loan growth was strong with 3.8% growth (not annualized). RESG origination volume guidance was withdrawn, but total loan growth guidance for mid-single-digit to high-single-digit for the year remains. CIB had a good strong quarter with ABLG leading in dollars deployed, CBSF leading in new relationship count, and new business units like the natural resources group being launched.

• Reiterated mid-single-digit to high-single-digit total loan growth for the year. - Withdrew RESG origination volume guidance but maintained aggregate loan growth guidance, expecting other business lines to pick up if needed. - Anticipated non-interest expense to grow by an estimated 10% for the year, with growth in various business areas driving this. - Expectations of record net interest income in at least one or more quarters of 2025.

• Macroeconomic uncertainty impacting originations, with short-term uncertainty affecting timing of deals. - Potential delays in property lease-up and financing due to market noise. - Uncertainties around specific loans like the Maryland land loan and the Chicago land project, including complex development and appraisal updates.

Q: Stephen Scouten asked about ESG originations, customer reactions, and CIB lending.

A: Brannon Hamblen discussed uncertainty, but customers remain confident in real estate deals, and CIB has strong pipelines with new business units.

Q: Manan Gosalia asked about NII and net interest margin.

A: Tim Hicks discussed NIM impacted by fewer days in Q1, COIBD decrease, and expectations of record net interest income. George Gleason discussed loan yield and deposit cost relationships with Fed rate cuts.

Q: Tim Mitchell asked about buybacks and expenses.

A: Tim Hicks and George Gleason discussed opportunistic buybacks and 10% growth in non-interest expense.

Q: Jordan Ghent asked about RESG mix and Maryland land loan.

A: George Gleason discussed RESG's decreasing percentage of the book, and Brannon Hamblen discussed the Maryland land loan's substandard accrual status.

Q: Samuel Varga asked about repayments and buybacks.

A: Brannon Hamblen and Tim Hicks discussed repayments and opportunistic buybacks considering capital ratios.

Q: Timur Braziler asked about Chicago exposure and Lincoln Yards.

A: Brannon Hamblen and George Gleason discussed individual loan treatment and positive outlook for Lincoln Yards.

Q: Brian Martin asked about reserves and OREO properties.

A: George Gleason and Tim Hicks discussed ACL build and updates on OREO properties like the Los Angeles land.