Bank OZK Q2 FY2024 earnings call

• Discussion on the San Diego life science project, including reserve replenishment calculations for the $87 million capital. Emphasized strong sponsors and motivation to support projects due to significant equity investments. - Comments on paydowns, noting variability from quarter to quarter and expectation of higher RESG repayments in the future. - Introduction to CIB business, with mention of team expansion and focus on quality and yield. - Explanation of loan structuring, including interest reserves and sponsor responsibilities. - Outlook on life science sector, noting return of capital and potential for improved leasing. - Discussion on diversification of balance sheet and talent acquisition for business growth.

No specific financial performance details for product segments in absolute terms and revenue contribution % provided in the transcript.

• Paydowns are expected to vary significantly by quarter, with Q3 and Q4 likely falling between Q1 and Q2 levels depending on Fed rate cuts. - CIB business is expected to grow to refill RESG balances, with focus on quality credits. - Share repurchase authorization and consideration of M&A as capital deployment options, with interest in FDIC transactions.

• Migration of risk ratings in CRE portfolio due to higher interest rates and leasing challenges. - Potential credit deterioration in CRE portfolio, reflected in increased allowance for credit losses. - Cyclical pressures in life science sector affecting leasing trends.

Q: Color on the $87 million capital for the San Diego life science project and how it was arrived at?

A: It was a regular reserve replenishment calculation based on loan document requirements, a mathematical judgment call.

Q: Thoughts on paydowns for the back half of the year?

A: Paydowns may vary, with higher repayments expected in future tied to Fed rate cuts.

Q: Outlook for CIB business?

A: CIB business is growing, with teams expanding, targeting quality credits in $30M to $150M range.

Q: Risk mitigants for loans staying on books longer?

A: Sponsors pay standard or upsized fees, replenish reserves, and may have principal paydowns.

Q: View on life science project spec nature?

A: Not a concern, as unleased properties are inherent in business model with strong underwriting mitigants.

Q: Capital deployment plans including share repurchase and M&A?

A: Share repurchase is opportunistic, and M&A, including FDIC transactions, is considered for capital deployment.