Bank OZK (NASDAQ:OZK) Q2 2019 Earnings Conference Call - Final Transcript
Jul 19, 2019 • 11:00 am ET
[Operator Instructions] Our first question comes from Ken Zerbe of Morgan Stanley.
Great. Thanks. Good morning.
Good morning, Ken.
I was hoping we could start off with expenses. Looks like expenses ticked up a little bit versus what I thought was a seasonally higher quarterback in first quarter. Could you just talk about what drove the higher expenses this quarter, and more specifically or more importantly, what is the outlook for expenses on a go-forward basis?
Hi, Ken. This is Greg. Let me start about that, then George can chime in too. But we're continuing to build our infrastructure as we've been doing now for a number of quarters. We are in the late innings on that. I think we're getting close to having that built out. We are hiring individuals to really come in and take the place of third-party consultants that we've been using to help us get some of these programs up and stood up. There's a little bit of a transition in some of that if you bring individuals in, and then begin to exit consultants out the bank. That process is ongoing. We expect that to continue over the next quarter or two.
I think you'll probably see a little bit of a continued increase in overhead in the next couple of quarters as we continue to make that transition and get the remaining infrastructure in place, although we think that you could -- can get beyond kind of the seasonally challenging Q1 of 2020. I think there's a pretty good opportunity today to keep the overhead. I must say a little more in check, that's to say it's not going to continue to have some increase, but I think you'll see the rate of increase, as we get to that point in time, much more likely to be muted at least relative to what you've seen in the last two or three quarters. That's really the biggest driver in overhead, as we think about overhead in the last four quarters, five quarters, six quarters. And that continues to be probably one of the biggest drivers, as we think about overhead for the next two or three quarters.
Okay. That does help. Maybe switching gears, in terms of the North Carolina credit, I understand you're trying to sell the South Carolina credit, but with North Carolina credit, it almost sounds like you're taking on the responsibility of finishing the project or the build. Could you just expand on that a little bit more, like what exactly is happening and what's the time frame of that? Thanks.
Yeah. Good question, Ken. As you are aware from previous calls, the sponsor there developed a lot of houses and there was ongoing development of lot. Some of those houses were not fully completed. There's a custom home buyer that's being built for a custom buyer. So we're completing those sort of construction elements in lot development area -- activities, and expect to sell those homes and lots have developed.