Bank OZK Q2 FY2025 earnings call

• New hires are across various areas including branches, CIB, business banking teams, and support functions driven by loan, deposit growth, and customer interaction.
• 11 branches opened so far in 2025 with 14 more expected in the remainder of the year and 25 planned for next year.
• CIB group is growing with business banking teams expanded in multiple states.
• Deposit costs are related to Fed moves and the bank has capacity to grow deposits within its current branch network.
• Loan growth: CIB expected to continue strong, RESG facing paydowns leading to revised full-year loan growth guidance to 11%-13% from prior high single digits.
• Appraisals: 98% of loans in number and 99% in dollar volume have appraisals dated after Dec 15, 2022, with weighted average loan-to-value up 2% due to new originations averaging lower LTVs.
• Sponsor support and engagement in challenged loans, with examples of sponsors putting in additional money and staying engaged with projects.

New hires are spread broadly across the company. The bank has opened 11 branches so far this year with 14 more expected in the remainder of the year and 25 planned for next year. The CIB group is growing with business banking teams built out in Florida, Texas, and Georgia. The Natural Resource Group is part of the CIB growth. Deposit costs are tied to Fed moves and the bank has capacity to grow deposits within its current branch network. Loan growth: CIB is expected to continue strong growth, while RESG is facing paydowns which are revising the loan growth guidance.

• Loan growth guidance revised to 11%-13% for the full year, up from prior high single digits due to paydowns in RESG.
• CIB is expected to accelerate growth with strong pipelines and expansion into new geographies and verticals.
• RESG origination volume is modestly increasing but faces higher repayments in coming quarters and 2026.

• Uncertainty in the economy affecting loan performance and reserve allocations.
• Challenges in RESG origination due to cautious sponsors and elevated number of lenders in the market.
• Special mention loans ebb and flow due to negotiations with sponsors and loan maturities.

Q: Stephen Scouten from Piper Sandler asks about new hires composition, business banking build-out, M&A impact on talent, and loan syndication.

A: George Gleason responds about new hires spread across the company, business banking teams built out in multiple states, M&A creating talent opportunities but reputation driving talent acquisition, and loan syndication in CIB with no $500M+ RESG syndication yet.

Q: Michael Rose from Raymond James asks about deposit growth, branch openings, and deposit cost expectations.

A: Cindy Wolfe responds that deposit costs are tied to Fed moves, the bank has capacity to grow deposits within its current branch network, and they are adding branches.

Q: Manan Gosalia from Morgan Stanley asks about RESG paydowns drivers and loans with significant LTV increases.

A: George Gleason explains paydowns are due to various factors like project stabilization, refinancing, and property sales, and details the loans with significant LTV increases and sponsor support.

Q: Matt Olney from Stephens asks about loan growth outlook for CIB and RESG in 2026.

A: Jake Munn and Brannon Hamblen discuss CIB expected to accelerate with strong pipelines and RESG facing higher repayments but modest origination volume increases.

Q: Catherine Mealor from KBW asks about appraisal trends and special mention loans.

A: George Gleason and Brannon Hamblen talk about appraisal process, weighted average LTV increase, and special mention loans ebb and flow due to negotiations.

Q: Brian Martin from Janney asks about CIB acceleration in dollar terms.

A: George Gleason and Jake Munn discuss CIB expected to contribute more to growth over time with strong opportunities and credit-first approach.

Q: Nicholas Holowko from UBS asks about CIB deposit contribution, credit performance, and allowance methodology.

A: George Gleason and Jake Munn talk about CIB deposit growth, credit quality with high pull-through rate indicating quality, and allowance methodology tied to economic scenarios.