Bank OZK (NASDAQ:OZK) Q4 2022 Earnings Call Transcript

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They did €“ those factors, those scenarios became a little bit more adverse compared to what they were as of 9/30. And so you saw us shift our weighting slightly, although we still are weighted to the downside through our combined weightings on Moody’s S4 and S6 scenarios. The provision in the last two quarters has greatly been influenced by the growth that we’ve had in our funded balance and unfunded balance. So the impact of our growth in funded and unfunded obviously, will impact the level of provision we have from quarter-to-quarter. And then as we get through 2023, obviously, Moody’s economic scenarios, we’d look at those during a 2-year forward projection. And so as you get towards the end of 2023, the 2 years ahead of where you are, are the scenarios that we’re looking at.

And so obviously, there is a lot of uncertainty of what 2023 brings. And so when we get more clarity, that may influence Moody’s forecast to and our weightings related to those as well. So a lot of factors go into that. Obviously, the last two quarters related to the growth that we had in both our funded and unfunded balance. And you did see our overall total ACL to total commitments move up a couple of basis points in the last €“ both the last two quarters. Reflective of that growth and really the economic forecast you’re seeing from Moody’s and our selection of those. Hopefully, that helps.

Timur Braziler: Thank you.

George Gleason: Tim, I’m going to add a comment here on something there. comment has been made that our ACL for unfunded loans is a lower percentage than our ACL for funded loans. And the question has come up previously. As funded loans moved to €“ or as unfunded loans fund and move to the funding category, does that mean we’re going to put up more ACL on it. That doesn’t follow. That’s not a connect, the reason that our unfunded percentage is lower than our funded percentages because RESG is a much higher mix. It’s 90% roughly of the unfunded at 60 €“ low 60%ish of the funded and our RESG loans are lower leverage, so they have lower risk associated with the lower loss exposure if you have a default on one of those loans.

So the ACL for those loans is lower the other loans, the typical community bank loans, consumer loans, RV and marine loans, all the other stuff that is mostly funded has higher ACL allocations part. So the movement of a loan from unfunded to funded doesn’t change the allowance allocation really for that loan in any meaningful way. So I thought I might clarify that because I think there is some confusion out there about that.

Timur Braziler: Great. Thanks, George.

George Gleason: Thank you.

Operator: Thank you. Our next question comes from the line of Catherine Mealor from KBW. Your line is open.

Catherine Mealor: Thanks. Good morning.

George Gleason: Good morning, Catherine.

Catherine Mealor: I wanted to talk about maybe the office portfolio, which you gave a little bit of disclosure on in your management comments, can you walk us through how much of that I think that $4.9 billion is funded versus unfunded, and kind of what the leasing looks like for some of these newer projects.

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