Release Date: April 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you discuss the impact of the "higher for longer" interest rate environment on your loan floors and net interest income?
A: (George G. Gleason - Chairman & CEO) The "higher for longer" scenario is beneficial for us as it allows more time to reset loan floors, keeping repayments muted which aids our net interest income. Although it poses challenges for some borrowers, the incremental credit costs are outweighed by the additional net interest income.
Q: Have there been any intentional shifts towards smaller, more granular credit sizes within RESG?
A: (George G. Gleason - Chairman & CEO) No intentional shift; the trend towards smaller deals reflects what makes sense economically for sponsors currently. Larger transactions are still possible but are less frequent.
Q: How are you managing the potential risks associated with office loans given the negative market trends?
A: (Paschall Brannon Hamblen - President) Our focus on newer, high-quality projects and strong sponsorship helps mitigate risks. The capital markets are showing interest in high-quality, newer vintage properties, which supports our portfolio's resilience.
Q: Can you provide insights into the trends and expectations around loan extensions in a "higher for longer" rate scenario?
A: (George G. Gleason - Chairman & CEO) Extensions are being managed with improved economics for the bank, including resetting floors and enhancing capital stacks. Most extensions are not considered troubled debt restructurings (TDRs) and are beneficial for both the bank and the clients.
Q: What are your expectations for deposit costs and net interest margins in the near future?
A: (George G. Gleason - Chairman & CEO) Deposit costs have stabilized and are expected to plateau, supporting a stable to improving net interest margin scenario as long as the rate environment remains consistent.
Q: How is the bank planning to manage the growth of RESG loans as a percentage of total loans?
A: (George G. Gleason - Chairman & CEO) The goal is to allow RESG to grow naturally but also to expand other business lines to diversify and enhance the bank's value. The strategic plan includes growing RESG to a point where it constitutes 50% of our business while expanding other areas significantly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
