OZK

Strategic Priorities

• Multi-year strategy to reduce reliance on RESG and increase portfolio diversification, moving away from concentrated commercial real estate (CRE) exposure to a more balanced three-part portfolio of community/indirect lending, RESG, and CIB by 2027
• CIB is a core investment priority: management is hiring experienced talent to grow the diversified segment, which generates additional non-interest fee income and lower-cost deposits alongside loan growth
• The bank has fallen below regulatory total CRE concentration limits (under 300%) and expects to fall below the 100% construction and development concentration guideline by the end of 2026 or early 2027

Operational Updates

• Net interest margin (NIM) increased 4 basis points in Q2 2026, despite an early-quarter wave of large RESG prepayments that depressed average earning assets
• Cost of interest-bearing deposits (COIBD) decreased 5 basis points in Q2 2026, a better outcome than expected given ongoing competitive deposit markets
• CIB added a new emerging middle market group to serve $15 million-$100 million revenue family-owned businesses in the bank's core footprint, bridging legacy community banking and larger CIB segments and leveraging the existing branch network
• The bank recognized $25.7 million in total charge-offs in Q2 2026, consisting of a $22 million charge-off on a Seattle office building and $3.7 million charge-off on a life science building that were fully reserved for in the prior quarter
• Share repurchases used ~$175 million of the prior $200 million authorization at an average price below tangible book value; a new $200 million authorization has been approved for the next four quarters

Credit Updates

• The bank saw a modest increase in special mention loans in Q2 2026, which management notes is a normal part of the credit review process, with most of these assets expected to return to pass-rated status after successful recapitalization/extension negotiations
• The life science portfolio (a source of recent negative credit migration) saw a pickup in tenant activity in H1 2026, including demand from AI and technology users in addition to traditional life science tenants; the bank exited its highest-risk life science asset via discounted payoff in Q2 2026, improving portfolio quality
• Over the past four quarters, ~$10 billion of the RESG portfolio has been repaid, with the vast majority of sponsors continuing to support their loans; only a small handful of assets have become classified or foreclosed, all of which have advanced resolution plans in place

• Full-year 2026 loan growth guidance is maintained at mid-single digits, with loan volume expected to step up sequentially in Q3 and Q4 after negative loan growth in Q2 driven by elevated early-quarter prepayments
• Elevated RESG repayments will continue for the remainder of 2026 and into 2027, with the pace of repayments expected to taper to a slightly lower (but still elevated) level in 2027
• Q2 2026 COIBD is expected to be an inflection point, with modest increases in deposit costs in Q3 and Q4 2026 as the bank ramps up deposit gathering to support expected loan growth
• Management's cautious near-term net interest income (NII) guidance (stating NII is likely to come in slightly below expectations of matching or exceeding 2025 NII) is driven solely by the timing/sequence of Q2 prepayments that reduced average earning assets, not by unexpected changes in deposit competition or other funding factors
• Allowance for credit losses (ACL) is expected to continue drifting down over coming quarters, assuming the economy maintains its current resiliency, as the bank works through the late stages of problem asset resolution from the CRE cycle
• Management expects CIB and RESG to reach equal size at some point in 2027, and for the entire loan portfolio to become broadly evenly split between three segments (community/indirect, RESG, CIB) by 2027
• Share repurchase activity under the new $200 million authorization will depend on the bank's stock price; management expects to use some portion of the authorization, with greater activity at prices below tangible book value that are accretive to EPS and tangible book value

Financial performance by portfolio segment:

1. Real Estate Special Groups (RESG): The legacy RESG portfolio stood at over $15 billion at Q2 2026 end. Elevated repayments hit ~$3 billion in Q2 2026, with a four-quarter trailing average of ~$2.5 billion per quarter. Originations have been muted, and the portfolio continues to shrink as it works through high 2022 origination volumes. RESG currently represents 48% of Bank OZK's total loan portfolio, down from prior higher levels.
2. Corporate and Institutional Banking (CIB): The CIB portfolio exceeds $7 billion as of Q2 2026, with steady quarter-over-quarter and year-over-year growth. CIB comprises 7+ diversified business lines (corporate banking/sponsor finance, fund finance, lender finance, natural resources, franchise capital solutions, asset-based lending, equipment finance, and newly launched emerging middle market) covering over 42 unique NAICS codes. In Q2 2026, corporate banking/sponsor finance and natural resources groups led growth, while asset-based lending slowed due to market pricing competition and aggressive advance rate pricing from competitors. CIB is expected to reach equal size with RESG at some point in 2027.
3. Indirect Lending / RV Lending: This segment accounts for 13.7% of the total loan portfolio, up from ~12% previously, with modest positive momentum.
4. Legacy Community Banking: This segment has remained roughly stable in balance for several years, but management expects positive growth moving forward after recent reporting reorganization.

• Large concentrated CRE loans from the 2022 record origination cycle result in volatile quarterly repayment volumes, which can create unexpected swings in average earning assets and make quarterly NII projections less accurate
• The life science sector remains challenged, with ongoing uncertainty around lease-up and tenant demand for some projects; while activity has improved, there is still remaining work to resolve stressed assets in this segment
• Some major CRE markets where Bank OZK originated high RESG volumes have implemented anti-business policies and higher taxes, reducing new origination opportunities and keeping RESG originations muted
• CRE new issue markets are highly competitive, with excess capital keeping spreads compressed on new RESG originations
• CIB growth can face margin pressure in certain segments when competitors offer overly aggressive pricing and advance rates, requiring active portfolio rebalancing to maintain risk-adjusted returns
• A small number of additional problem assets are expected to emerge over the next 18 months as the CRE cycle concludes, which could result in additional charge-offs
• Ongoing competitive pressure in deposit gathering requires periodic increases in deposit rates to grow balances as loan growth picks up

Q: Stephen Scouten (Piper Sandler) asked for an update on CIB portfolio diversification, future loan loss reserve trends for CIB, and fee impact to date. / A: Management confirmed CIB is a strategically important, fast-growing franchise with 7 core business lines plus a newly launched emerging middle market group, covering over 42 NAICS codes to support broad diversification. CIB reduces overall portfolio CRE concentration without creating new concentration risk, and the diversified structure allows management to pull back from competitive segments with compressed spreads and lean into higher risk-adjusted return opportunities. CIB also generates additional deposit and cross-sell opportunities for treasury management, wealth management, and hedging services, driving non-interest fee income alongside loan growth.

Q: Stephen Scouten followed up for an update on the upcoming August maturity of the IQHQ property in the RESG portfolio. / A: Management confirmed the bank is in constructive discussions with the sponsor and mezzanine lender for a multi-year extension and recapitalization; terms are not yet finalized, but the bank is encouraged by the dialogue and expects to provide a full update once the transaction is completed. All interest payments are current, with no payment-in-kind activity on this or any other Bank OZK loan, and the asset remains pass-rated based on the positive negotiation trajectory.

Q: Matt Olney (Stephens) asked for additional color on new guidance calling for elevated RESG repayments through 2027, and full-year 2026 mid-single digit loan growth implications for H2 2026. / A: Management explained elevated repayments are driven by the natural cadence of the record 2022 RESG origination cycle, with ~$3 billion in repayments in Q2 2026 and a four-quarter trailing average of $2.5 billion. Repayments will remain elevated in 2027 but will taper slightly from 2026 levels. The mid-single digit full-year loan growth guidance is unchanged; Q2 had negative loan growth due to an early wave of large prepayments that was harder to offset with new originations, and management expects more levelized prepayments and sequential loan growth in H2 2026.

Q: Manan Gosalia (Morgan Stanley) asked if the revised NII outlook is driven solely by payoff activity or if other factors (like funding competition) are contributing, and asked for an update on ACL and special mention loan trends. / A: Management confirmed the softer NII outlook is solely due to the unexpected timing of large Q2 prepayments that reduced average earning assets, with no new changes in deposit competition beyond the already expected competitive environment the bank projected at the start of the year. The recent increase in special mention loans is a normal part of credit extensions and recap negotiations, with most of these assets expected to return to pass-status in the next two quarters. ACL has been decreasing over recent quarters as previously reserved charge-offs are realized, and this trend is expected to continue if economic resiliency holds, as the bank is in the late stages of working through identified problem CRE assets.

Q: Janet Lee (TD Securities) asked if the shift to a larger CIB portfolio will result in a structurally lower NIM, given CIB's historically lower yields than RESG. / A: Management explained the yield differential between CIB and new RESG originations has shrunk dramatically in recent years, as new RESG originations are now overwhelmingly multifamily and industrial loans with spreads similar to CIB. CIB also generates much higher non-interest fee income (from hedging, treasury management, and capital markets services) and attracts lower-cost core deposits, offsetting any small remaining yield gap. CIB's average new loan spread has actually increased 25 basis points over the legacy CIB book average in the most recent quarter, as management actively prioritizes higher risk-adjusted return segments, so CIB is expected to be as profitable long-term as RESG.