Bank OZK (NASDAQ:OZK) Q1 2024 Earnings Call Transcript

Samuel Varga: Understood. Thanks for that color. And just a quick follow-up. You obviously have a pretty unique view on LTV migrations, and I appreciate all the disclosure you have quarter-over-quarter. I was wondering if the valuation adjustments that you’ve seen, if you think — if your view is that, that’s sort of appropriately baked into the Moody’s scenarios? Or could there be sort of a lag effect in the allowance where it actually has to come up, not because of your own portfolio, but because Moody’s catches up to what you’re already seeing today.

George Gleason: I think our valuations that we’re getting are good valuations based on the information that is available to the appraiser. So we — and if we get appraisals that we don’t think are reflective our appraisal services guys that’s an independent unit within our company push back and ask questions, and if there are bad assumptions or misinformation in the appraisals, they push back, get that cleaned up and get their prices line up. So I think the appraisals we’re getting are good. Our belief is that all of the relevant factors are adequately and appropriately addressed in the various Moody models and our ACL calculation. We continue to maintain a pretty cautious distribution of assumptions. Our Moody’s S4 scenario, which is sort of the adverse downside economic scenario.

I guess you maybe characterize that as a hard landing scenario and the Moody’s S-6, which is a stagflation scenario or the majority of our allocation of our distributions. The baseline is less than the combined effect of the S-4 and the S-6 scenario. So I think we’ve got an appropriately conservative scenario selection and that scenario selections predicated on fact that just a lot of moving economic, political, geopolitical variables that could impact our customers and credit losses. So we’ve taken a fairly cautious view of that just because of the high degree of uncertainty in the global economy. So I feel good about what we’re doing. And as Tim mentioned, over the last seven quarters since Fed started raising rates, our ACL has gone from $300 million to $537 million.

We’ve had a $237 million increase in our ACL, which, I think, appropriately addresses the fact that we’ve got a 525 basis point increase in the Fed funds target rate, and it seems likely to stay there for a while.

Samuel Varga: Understood. I appreciate all the color. Thank you.

Operator: That concludes the question-and-answer session. At this time, I would like to turn the call back to Chairman and CEO, George Gleason for closing remarks.

George Gleason: Thank you so much for joining the call. We look forward to talking with you and giving you an update in about 90 days. Have a great quarter. Thank you.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.