Bank OZK (NASDAQ:OZK) Q2 2019 Earnings Conference Call - Final Transcript
Jul 19, 2019 • 11:00 am ET
a reasonable expectation, like if you go through like loan-by-loan of your portfolio to try to examine what could pay off like, where is the lower bound of loan growth this year?
Well, we do go -- we base our projections based on a loan-by-loan analysis. And as you know, in our RESG portfolio, we average about 14 loans per asset manager. So our asset managers are very close to those transactions. These tend to be larger, complicated transactions, so sometimes a sponsor says, we expect to pay this off in May, and for some reason or another, negotiation was with their partners, negotiations with the lender on the other side, that moves forward to or moves back to August or October for some reason.
And then, as we've experienced quite a bit recently, projects -- we've had a few projects that were pretty sizable that had been pulled forward on the spectrum. And we had at least one pretty sizable project in Q2, and we've got a couple more coming in the second half of the year that we've been notified or repaid down that have not even reached a CO status. It's historically been very rare for us to get paid off and refinanced mid-construction or before a project is -- at least has a temporary certificate of occupancy. But we've got several of those examples that have accelerated repayments this year.
So we're giving the best guidance we can give on that, but there are things to cause those payoffs, repayments to be sometimes delayed, sometimes accelerated. And you can do your very best to predict that, and you're usually right within a quarter two, but sometimes you get surprised.
All right. Thank you very much.
Our next question comes from Timur Braziler of Wells Fargo Securities.
Hi, good morning. Maybe looking at the deposit side, and some of the commentary around cost of interest-bearing deposits, what's being done that gives you guys optimism that you can lower the potential costs of interest-bearing deposits ex a rate cut in the third quarter?
Yeah, Timur. It is Tim. Good morning. I think we're actively managing that deposit book. We really started on July 1 with a lot of our institutional public fund customers talking about the rate we pay on those. Obviously, LIBOR went down 10 basis points in Q2. So rates -- even though Fed hadn't moved, rates have decreased and we've had those conversations with some of our larger deposit customers. And so, we really started that really early in the quarter. So we're trying to stay ahead of what the Fed is doing. And even though the Fed hasn't moved yet, some of those rates have already come down. And even our promotional CD rates, we brought down in early July as well. You've seen many in the industry also bringing down their deposit rate.
So I think between that and the moderated loan growth guidance that we've outlined here, allows us some