Bank OZK (NASDAQ:OZK) Q2 2019 Earnings Conference Call - Final Transcript

Jul 19, 2019 • 11:00 am ET

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Bank OZK (NASDAQ:OZK) Q2 2019 Earnings Conference Call - Final Transcript

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Q & A
Executive
George Gleason

There is some remaining work to be done on that project.

And then, the question will come at some point in time, how you continue development? Do you just sell lot, do we need to develop some more inventory? So we're going to try to operate that in a way to maximize our proceeds and hopefully recover some monies that we have written-off. We're not going to get into a massive development project, but there is work to be completed and it is an ongoing operating project with amenities that operate and so forth. So we're going to operate it and work our way out of it in an orderly manner.

The --

Analyst
Ken Zerbe

Is there any -- go ahead.

Executive
George Gleason

Yeah. The South Carolina property is obviously a much simpler project to sell, because it's flat for someone to acquire a rate position and redevelop it in a major way. I will comment a couple of the analysts noted in their write-ups, commented that we had foreclosed on these properties. But we actually did not foreclose on either one of them. We acquired [Indecipherable] transactions and that took a little while, because we had to do all of our redo and recheck all of our environmental due diligence and insurance and get certain permits and operating licenses transferred and so forth. So both transactions were transferred to us in a cooperative agreed-upon transaction with the cooperation of the sponsor.

Analyst
Ken Zerbe

I see. And with the North Carolina project, is there any risk of additional write-downs in terms of your exposure, if you don't complete the projects and you sell just the lots, or any other -- basically any other risks to you guys?

Executive
George Gleason

Well, there's always a risk of additional write-downs, but I think that's extremely low in both transactions, given the conservative nature of the appraisals that we received. In fact, we wrote the assets down when we received those appraisals in the third quarter of last year to 80% of appraised value. And of course, we've previously mentioned on the South Carolina projects that in the couple of quarters, after we put it on non-accrual, we captured $0.5 million or so of cash flow that went to reduce the balance on that.

So I think write-downs are unlikely, but our practice is to re-appraise OREO properties on an annual basis. So as long as they are in foreclosed assets, they're subject to re-appraisal and if those appraisals came in more adverse, then we would have a write-down from that. The reality is, I think it's very unlikely.

Analyst
Ken Zerbe

Okay. And then just one more question, if I could. I understand how hard it is to forecast repayments on the loan portfolio, the RESG portfolio. But is there a way of kind of quantifying the lower bound of potential loan growth? I did notice that you did reduce your loan growth guidance for the year due to even more elevated payoffs. I'm just wondering how bad could it be within sort of