Bank OZK 2026年第三季度 业绩电话会议总结

Bank OZK（NASDAQ: OZK）预计，在2027年增长加速之前，房地产专业业务组（RESG）的大额还款将在2026年第四季度给贷款余额带来压力。管理层强调了资产组合多元化、低成本存款增长、资本效率以及商业地产状况的改善。

核心要点

• Bank OZK预计2026全年贷款增长为3%至5%，由于RESG还款接近或可能创下季度新高，这意味着第四季度余额将有所收缩。
• RESG在10月的前19天内录得约6.9亿美元的还款和本金偿付。此前原预计在2027年第一季度进行的部分还款可能会提前至2026年第四季度发生。
• 在公司及机构银行（CIB）、间接贷款和社区银行业务的支撑下，管理层预计2027年贷款增长率为10%至12%，并预计2028年将进一步加速。
• 在假设美联储不再加息的前提下，2027年净利息收入（NII）展望为低个位数增长。模型显示，在利率上调100个基点的设想情景下，预测期内NII将增长约4%。
• 止赎资产总额约为4.2亿美元。管理层表示，除七处主要物业中的一处外，潜在买家在其余物业上均表现积极，但管理层将优先考虑审慎处置，而非快速贱卖。
• CIB存款环比增长超过20%。管理层预计，在2027年和2028年期间，无息存款和低成本存款将继续取得进展。

核心财务数据

业务与经营业绩

贷款组合多元化

CIB仍是主要的增长引擎。管理层预计CIB余额将在2027年期间超过RESG余额。该业务目前涵盖九大主要业务线，客户跨越44个三位数字NAICS代码行业。

在本季度，CIB的增长包括增加了65个以上的新客户关系，以及对18个以上的现有客户关系进行了重大增额。管理层报告称，截至季度末CIB无逾期贷款，且资产组合中无追溯净核销。

RESG占总贷款的比例已从几年前的约70%降至50%以下。管理层预计RESG余额将在2028年达到拐点并恢复增长，尽管具体时间仍存在不确定性。

Bank OZK于10月1日推出了间接机动运动设备（powersports）贷款业务，对其游艇和房车（RV）业务形成补充。该行继续将目标锁定在超优质（high-prime和super-prime）借款人上。

存款与费类收入

Bank OZK正投资于资金管理团队、技术和支付能力，以深化CIB和社区银行业务关系。其目标是吸收更多运营账户、无息存款和低成本资金。

管理层表示该计划仍处于早期阶段。预计在2027年和2028年将取得更显著的进展，同时也承认定期存单（CD）仍将是重要的资金来源。

在扣除历史上包含与收购相关的廉价购买收益的季度后，预计2026年第四季度的非利息收入将再创新高。管理层预计，与2026年相比，2027年非利息收入将实现高个位数增长。

资本与运营效率

该行目前已低于监管规定的300%商业地产（CRE）集中度指引。管理层预计其将在一至三个季度内降至100%的建筑与开发（C&D）指引以下，从而为内生性增长、股票回购和其他资本配置提供更大的灵活性。

内生性增长仍是资本配置的首要任务。管理层还打算在估值具有吸引力时适时实施回购，并正在评估提升股本回报率（ROE）和资本效率的方法。

尽管在CIB、资金管理、技术和面向客户的运营领域持续投资，管理层仍预计效率比率将维持在30%左右的区间。过去两个季度，随着该行重组现有职能并向增长领域追加资源，员工净人数减少了约94人。

信贷与商业地产

管理层描述了在多家庭住宅、工业、办公及生命科学物业租赁、再融资和出售活动方面的改善状况。在九个生命科学项目中，五个产生了租赁活动，三个的出租率达到了98%至100%。

Bank OZK表示，奥克兰Portico滨水公寓项目的贷款在随后的物业出售前已全额还清，未对该行产生任何信贷影响。

对于电话会议中讨论的圣迭戈项目，夹层贷款人和股权投资者共同注入了总计1亿美元的追加资本。贷款本金减少了1.21亿美元，并展期三年。管理层提到，租户招募范围已扩大至生命科学、办公、技术、AI、国防及其他潜在用户。

管理层业绩指引

• 2026年第四季度贷款：随着RESG还款接近或可能突破历史季度纪录，管理层预计贷款余额将有所收缩。
• 2026全年贷款增长：3%至5%。
• 2027年贷款增长：10%至12%，预计2028年将进一步加速。
• 2027年净利息收入：假设美联储不再加息，预计实现低个位数增长。
• 利率敏感度：在未来五个季度内若进一步加息25至75个基点，可能会对NII和净息差提供支撑，具体视时间安排和存款定价而定。
• 2027年非利息收入：预计较2026年实现高个位数百分比增长。
• 效率比率：管理层意图将该比率维持在其历史30%的区间内。
• 存款结构：预计在2027年和2028年期间，无息存款和低成本存款将逐渐改善。
• 商业地产周期：假设市场持续改善，管理层认为到2027年底，最具挑战性的周期将基本过去。

风险与关注领域

• 接近历史纪录的RESG还款可能导致第四季度贷款余额出现较大幅度下滑，并引发已报告增长数据的季度波动。
• 存款定价竞争依然激烈，这可能会限制利率上升给NII带来的收益。
• 止赎资产处置的推进节奏存在不确定性，因为大型商业物业的出售和租赁交易可能需要数个季度。
• 商业地产租赁正在改善，但仍慢于管理层和项目发起人的预期。
• 管理层认为再加息25至75个基点是可控的，但表示若加息200至300个基点，将造成困难得多的环境。
• 计提拨备将取决于贷款增长、宏观经济状况、计量经济学假设以及具体信贷评估。管理层未对具体的拨备计提轨迹做出明确承诺。
• 证券投资组合仍面临按市值计价的波动，但管理层表示不计划出售这些证券，并将更高的收益率视为再投资的机会。

分析师问答要点

为何贷款增长会在第四季度转弱并在2027年反弹？
管理层将第四季度的展望归因于RESG还款的时间安排，包括部分原定于2027年初还款的项目提前。管理层指出了CIB、间接贷款和社区银行业务中显而易见的机遇，以此支撑2027年10%至12%的增长展望。

该行将如何处置约4.2亿美元的止赎资产？
潜在买家在多数主要物业上表现积极。位于亚特兰大的一处物业正主要进行租赁定位，因为管理层认为采取耐心的策略存在潜在的上行空间。该行无意以牺牲价值为代价加速销售。

进一步加息是否会提升盈利？
管理层表示，浮动贷款收益率重定价的速度通常快于存款成本。约84%的贷款为浮动利率，且只有不足1%的贷款当前受制于利率上限，从而留下了巨大的重定价空间。

CIB如何在不削弱信贷质量的情况下实现增长？
管理层指出了资深员工招聘、细分化贷款投放、九大业务线以及审慎的承销标准。CIB在本季度新增了65个以上的客户关系，同时报告称季度末无逾期贷款，且无追溯净核销。

证券投资策略是什么？
该组合每季度产生约1亿美元的现金流，从而允许将收益率约为3.5%的到期证券重新投资于更高利率的产品。管理层还强调了免税和较低风险权重证券的资本效率。

业绩电话会议完整文字实录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and thank you for standing by. Welcome to the Bank OZK Third Quarter 2021 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Jay Staley, Managing Director of Investor Relations and Corporate Development. Please go ahead.

Jay Staley

Good morning. I'm Jay Staley, Managing Director of Investor Relations and Corporate Development for Bank OZK. Thank you for joining our call this morning and participating in our question-and-answer session. In today's Q&A session, we may make forward-looking statements about our expectations, estimates and outlook for the future. Please refer to our earnings release, management comments, financial supplement and other public filings for more information the various factors and risks that may cause actual results or outcomes to vary from those projected in or implied by such forward-looking statements.

Joining me on the call to take your questions are George Gleason, Chairman and CEO; Brannon Hamblen, President, Tim Hicks, Chief Financial Officer; and Jake Munn, President, Corporate and Institutional Banking.

We will now open up the lines for your questions. Let me now ask our operator, Liz, to remind our listeners how to queue in for questions.

Operator

[Operator Instructions] Our first question will come from Matt Olney with Stephens.

分析师问答

Matt Olney

I want to start on the loan growth. we saw good results in the third quarter, but it sounds like you're anticipating some pretty meaningly decline in the current quarter. So can you talk about the line of sight you have for those loan balances decline in the near term? And then conversely, you expect to see some positive growth in '27. So I'll also talk about the line of sight you have for loan balances to rebound meaningfully next year.

George Gleason

Yes. Thank you, Matt. I appreciate you being on the call this morning and appreciate the question. Obviously, we had a very good quarter of loan growth in Obviously, also, that was driven by growth in CIB and to a lesser extent, indirect marine and RV and community banking as expected, RESG had moderate to heavy payoffs in the quarter. They will directional difference between Q3 and Q4 is several RESG payoffs we have projected in Q3 actually have occurred in Q4.

You've already seen that in the guidance we gave that we've already had in the first 19 days of October $690 million or so of RESG payoffs and pay downs. So there was a little bit of shift from Q3 to Q4. We expect, as we said in the management comments, near record RESG payoffs and perhaps record RESG payoffs in Q4. So that will put up against continued strong origination from CIB and what we expect will be continued positive origination from indirect lending and community banking.

And we think you may see a little bit of retracement in balances in Q4. We've given the guidance that we expect growth for the full year to be at 3% to 5%. So that would suggest retracement in Q4. That is probably 1% or so below the guidance we had given at the beginning of the year, and that reflects the fact that we've got a few RESG repayments that we had originally at the beginning of the year thought would occur in Q1 of next year that may pull into this year.

So that movement and potential shift from Q4 of this year and next year sort of explains the fact that we've given a percent increase to our upside loan growth guidance for next year. really reflects the fact that some of that may come into Q4. So it's all the same expected movements. It's just a little bit of difference between Q3 and Q4 and Q4 and Q1 of next year in that guidance.

To follow on to your second point, we do expect really nice loan growth next year being 10% to 12%. We -- you never have them closed until you have them closed and on the book. But -- we have pretty good line of sight into opportunities that all of our business lines are working on, of course, that gets you a quarter or 2. But you can see the momentum of those business lines.

And we feel pretty good about that guidance and expect that loan growth number to accelerate further in 2028 from the 2027 level as a result of the fact that we should be pretty much through, if not all the way through this RESG repayment wave by the time we get to 2028. We think RESG's balances that have been steadily declining because of the high level of paydowns will inflect at some point in 2028. We hope that's earlier rather than later, but we'll have more clarity on that as we get a few quarters down the road.

So we think RESG will contribute to growth at some point in 2028, along with the continued positive momentum from CIB, indirect lending and community banking. You will also note we've enhanced our indirect lending growth potential by adding another business line that launched October 1. So we feel pretty good about those future growth numbers.

Matt Olney

I appreciate the color, George, on the loan growth front. And if I could move over to the credit, the foreclosed asset balances, I think we're now at $420 million. I appreciate you guys providing some good details behind each of those 7 main properties that make up that balance. Any more color you can provide on when you expect to see more activity with these properties that will result in declines of the overall foreclosed balance?

George Gleason

I appreciate that question. Obviously, that's a focus. And while it is a focus, Matt, it's not something we're being hasty or urgent about. You can liquidate these properties in a thoughtful manner and not getting a hurry and not take losses you don't need to take. And that's what we're trying to do is be smart and responsible.

So as we mentioned in the management comments, we've got active buyers potentially working on all of those properties, except for one, and on that one, we're really not focused on selling it as much as we are leasing that we mentioned in the management comments that there's property, the property in Atlanta that we feel like there's a really good potential for some upside on that property if we're patient and approach the leasing on that. And we have a couple of interested parties that we're working for leasing opportunities.

Those things, whether it's a sale of a big commercial property or a lease of a property type several quarters to work out. And sometimes as we've seen with that sunset land and Los Angeles, you have to go through the process a couple of times to finally get 1 that gets to the finish line and work. But we feel like we have those appropriately valued -- we're working diligently on prospects all the time on those.

And they'll sell at the right time and hopefully, they're for the right price. So we feel pretty good about that portfolio. We share your desire and the desire of all of our shareholders that we get those balances moved on and off of our books as quickly as we can. But we want to do that prudently and not red closely or hastily.

Operator

Our next question comes from Woody Lay with KBW.

Unknown Analyst

I just wanted to touch on the NII guide to start, and I appreciate the 2027 color you gave of low single-digit growth relative to 2026. And I believe that assumes no further Fed rate hike. And I was just curious, if we did get a couple of rate hikes, how you all would expect that to impact overall NII growth?

George Gleason

Tim, do you want to take that?

Tim Hicks

Yes. I sure will. Obviously, in our management comments, we talked about how our loan yields typically move a lot quicker than our deposit costs on increases in the Fed rate and 1-month term SOFR sometimes leads that increase as well. So we benefit from that being ahead of the Fed, just like we saw in September, I think we had 10 or 12 basis points of increase in 1-month term SOFR on September 10, which is typically when a lot of our -- either the first or tenant is when the -- when a lot of our variable rate loans reset. So I think if you looked at our interest rate sensitivity analysis and up 100 scenario.

You've got -- our interest rate sensitivity shows about a 4% increase in NII over that time period. So every quarter point is a meaningful increase. It depends on the timing of that and where the deposit costs come in, and we've talked about deposit costs being competitive throughout the year. But it would improve what we've guided to. To the extent of the improvement depends on the timing and the amount of any increase.

George Gleason

Woody were not seen a scenario near term where there's Fed rate reductions, Fed rate cuts. So our guidance assumption of no which permeates through all of our interest guidance numbers of no further Fed increases is pretty much the most conservative scenario, I think, to Tim's point, 100 or a 25 or 50 or 75 basis point increase in rates with 1, 2 or 3 increases in interest rates over the next 5 quarters should be somewhat helpful to our net interest income and net interest margin.

Unknown Analyst

Yes. I appreciate the color there. Maybe shifting over to capital. You're now below the 300% regulatory CRE ratio. I think you call out you'll soon be under the 100% C&D ratio. And then in your comments, you talked about how that being below those thresholds provides greater flexibility for capital deployment. And I was just curious on any color how you would plan to use that capital flexibility and if there's -- does it shift the capital ratio that you all would target longer term?

George Gleason

Tim?

Tim Hicks

Yes. I mean, as we've talked about, George just mentioned, organic growth, we're expecting to be stronger in '27 than it was in '26, and we're expecting it to be stronger in '28 than it was in '27. So obviously, deploying our capital for organic growth is priority #1. But we do have robust capital levels, which allow us to be opportunistic and in buying back shares when they're at a good value, like they've been recently. So we do we do have quite a bit of flexibility in our capital. That's a great position to be in.

We've increased our dividend for 65 quarters in a row and have had really accretive share repurchases, not only this year, but if you look back at the last 5 years, almost $1 billion of share repurchases over that time period. So we're disciplined in how we deploy our capital, looking for looking for different opportunities and organic growth and adding different business lines, as George mentioned, in indirect lending.

And obviously, CIB has several different growth engines that we've talked about in management comments as well. So -- we're in a great position from a capital standpoint and allows us a lot of flexibility to look to increase shareholder value where we can.

George Gleason

And we're looking at additional ways that we can enhance our capital utilization and efficiency with the goal of getting our return on equity up, that's 1 of our goals. We've mentioned that on the first page of text in our management comments at the bottom of the page that improving our efficient use of capital and return on capital is an important goal for us. And no longer being subject to any additional capital requirements because of being CRE-concentrated is a really good first step in being able to have more flexibility and efficiency in the way we utilize capital.

And you mentioned we're no longer subject to the 300 guideline. We're below that. And we will soon, I think, in the next quarter or 2, probably 3 at the most, be below the 100% guideline. So those are important steps in improving our capital efficiency.

Unknown Analyst

That's great to hear. And if I could just sneak 1 more in on the credit side. There were some headlines on the reported sale of the Portico waterfront apartment loan in Oakland. I was just curious if there was any color on that sale and how it could impact credit here in the near term?

George Gleason

We were paid off in full on that loan. And the sale that occurred after our payoff was after we were paid off. So Brannon, do you have any comments you want to make on that Portico project?

Paschall Hamblen

That's an accurate statement, George. -- equity partner in the deal paid us off and then took the action they took. So no credit impact to us.

Operator

Our next question comes from Brian Martin with Brean Capital.

Brian Martin

See, George or whomever, can you just talk a little bit about just given your comments about the payoff George in the fourth quarter potentially being a record for RSG. -- just kind of the pace of diversification and just kind of that portfolio shift. Just kind of where you think if you just kind of line of sight into '27, how you think that plays out given some of the payoffs you're expecting near term?

George Gleason

Yes. Diversification is 1 of our sort of core tenets and objectives and really repositioning our balance sheet in our company. And again, 1 of the 4 things we talk about on that front page of management comments. And it's -- the 4 things we mentioned on the front page of management comments, it's the 1 we're farthest along in achieving. And you clearly see that as our RESG has dropped from a high of 70% of our loans a few years go to below 50% and continues to decline. And as we mentioned, I is almost certainly going to surpass RESG and outstanding balances at some point next year.

And somebody could look at that and say, "Oh my gosh, CIB is the new RESG and then you've got traded on concentration or another. But CIB has a multiplicity of businesses. And as we mentioned, already has -- even with the size of their customer base to date customers with 44 different 3-digit NAICS codes. It's very diversified by loan type as reflective of the different business teams within CIB. It's very reflected by borrower business as reflected by the diversity of Nacco, it's very diversified by geography.

So it is inherently diversified within itself which certainly lines up well with our theme and objective of just getting a more highly diversified balance sheet. We've been in the indirect business now for 10 years more or less and really, I think, proven out to everybody's satisfaction with a high-quality consumer portfolio. We have with our RV indirect business and our marine indirect business. And we have added effective October 1 power sports to that. We've been working on this talking about it for years and really working on it for a year and roll that out effective October 1, and they've already booked our first handful of transactions in the power sports place.

So that's another element of diversification. While the dealer base that we work with 1,500, 1,800, 2,000 how many it is dealers we work with to originate both loans and RV loans. A lot of those dealers also have power sports businesses. So it lets us utilize our same dealer base to some extent. There will be separate dealers for each as well. But there's a lot of overlap there, but it lets us reach a very different customer base, your powersports customers a different customer typically than your RV or your marine customer.

We'll still be looking at higher high prime, super prime. So our customer base there is consistent with our focus throughout our company on credit quality. But it gives us another element of diversification there. And you're seeing some positive growth in our community banking business with a real focus there on more small business and consumer. So that is further accretive to our efforts for diversification. So we're very serious about long-term diversification of the portfolio.

And we think that's a very important step to building shareholder value and getting a share price that is reflective of the exemplary financial performance that we achieved. We're not getting paid -- our shareholders and not getting paid for the performance we're putting up because of the concerns about our CRE concentration. And we understand that. We're going to fix that. And we're very focused on delivering good shareholder value. And I think you'll see steady progress in that regard over the next several years.

Brian Martin

Got you. And just line of sight, George, if you think out into late '27 in terms of all those pieces, I know I guess, CIB outpaces RESG sometime next year, I guess, kind of still being equal partners in terms of CIB, RESG and then kind of the other groups. Is that how to think about it longer term?

George Gleason

Yes. We've historically said we would keep indirect around 10% to 15% of our business. It's been steadily in that 12% to 13% range for years now. With the addition of power sports, we're willing to let that 15% ratio go up a couple of points. I do think you'll see a lot more contribution from our community banking group going forward. CIB continues to add teams focused on different lines of business. they're going to continue to add more teams in the future, getting further diversification in that line of business.

So I think, as I've said earlier, that RESG will have an inflection point on their balances and will begin to grow again in 2028. But there's a lot of momentum about CIB. So I don't know that RESG catches back up with where I think CIB will be in '27 and '28 future years. There are just so many more businesses that we're going to touch through CIB that it just creates a much broader spectrum of sustainable long-term consistent growth.

When 1 of those business categories, 1 of those teams is finding themselves in an environment that, for some reason, I know that has gotten hypercompetitive, and it's harder to book deals that meet our return standards you've got other teams that can step up and deliver and it's just much more inherently diversified than our RESG business.

Brian Martin

Got you. No, that's super helpful. And congrats on the success of CIB. And maybe just the other 1 for me. Just on the on the resolutions of the OREO you talked about? And then also, I guess, the other point, the special mention, which is the kind of the early warning bucket, saw a really nice decline this quarter. So just kind of touching on the reserve levels and just provisioning. It just feels like charge-offs maybe being lower next year, the OREO potential resolution, like you say, not gradual.

And then the decline here in special mention really point to a very positive credit picture and maybe lower reserving going forward. Is that in general, how we should expect things to play out or at least you're expecting the next several quarters to look like?

George Gleason

Tim, do you want to take that?

Tim Hicks

Brian, thanks for that question. I think you're framing it right. We obviously have growth coming next year as well. So we'll have to take that into consideration. Macro environment, we'll have to take that into consideration. But you saw a lot of good credit quality improvements and you're pointing to special mention improvement, that was a clear positive.

Our net charge-off ratio being the lowest quarterly of the year, it was positive. So we're working hard to keep that momentum moving in the right direction. Hard to predict provision level, but I think you're thinking about the factors correctly that would go into our consideration there.

Operator

Our next question comes from Janet Lee with TD Cowen.

Sun Young Lee

In the management commentary, you cited net charge-offs will likely remain elevated at '26 and '27 and then be an improving trend in 2027. In the back, if we get higher rates, how should we think about that in the context of 2027 improving? Do you -- what gives you the confidence that the levels are coming down in '27 and to what extent?

George Gleason

Well, let me -- I'm going to ask Brannon to just comment on what he's seen in the market regarding leasing and sales activity and in commercial real estate and some of our projects in particular. And I think that might give the color for your answer. Brannon, do you want to talk about what you're kind of seeing as trends and developments in the market.

Paschall Hamblen

Absolutely, Janet. Thanks for the question. Look, it's an interesting environment with the macro issues, the rate issues -- and so there are things moving in different directions. But I can tell you with respect to all the things George just mentioned, the activity that we're seeing in our portfolio, it's been an encouraging year.

And really, I would say, across property types, and we're seeing that in our existing portfolio and -- and look, even with the headwinds to new originations and to new projects starting, we're still seeing a decent pace there, an encouraging pace. And in our legacy portfolio, the multifamily projects continue to lease. Obviously, that particular product type tends to see in certain markets, the easiest sort of path to overbuilding. But we have originated loans in markets that have very strong demand.

And while demand may soften as supply peaks. That demand is we're seeing it quarter after quarter continue to to do its work in resetting vacancy. So we see our occupancies building across our multifamily projects in our industrial portfolio, continue to see good leasing activity there and really refinance activity. We've mentioned there's a lot of liquidity in the debt markets and that makes life difficult for our originators, very competitive on the origination side, but it creates liquidity on our legacy portfolio side and is generating a lot of repayments there.

But -- so we're seeing continued leasing in industrial office. We've said several times in our comments over the last couple of quarters that we're encouraged at the pace of office leasing. And that continues really across different projects and you've got some stronger markets, Texas being 1 of those that really have very strong leasing, but even in others like Denver that aren't specific, we're seeing good activity on our projects there. So we're encouraged at our office activity.

And even life science, we've got 9 life science projects in our portfolio. 5 of those have leasing and 3 of those are between 98% and 100% leased. We've got 2 buildings that are working full building leases currently and then we've got 1 building -- 1 project that's working a sale that would fully retire a loan and another that the sponsor is taking to market in a portfolio sale pursuit that would also fully repay our loans. So I can't say enough how encouraged we are at the continued progress in leasing in recapitalization, refinance payoffs and sale payoffs across the board.

George Gleason

Yes. And I would add to that. We're not all the way through this challenging CRE cycle, but we're a long way through that cycle. And another good data point, 1 of our folks that provides coverage on us seems focused on providing a list of loans that he's concerned about every -- so often a week or 2 ago, we issued a report, there was a list of loans attached to for those loans have already paid off. So things that might look concerning out there there's liquidity, there's movement in the markets. There is leasing occurring.

We would like for that leasing to be faster. Our sponsors would like for that leasing to be faster, but there's a lot of very positive trends going. So -- we've seen a lot of healing in the market in 2026 as far as correction of supply-demand dynamics and rebalancing of supply to get closer to demand. I think you see a lot of that again in 2027. So we think it's a market that is largely behind us by the time we get to year-end 2027.

Your question about rising rates, and how that would impact the market. If Fed raises rates another 25, 50, 75 basis points, I think that has a very negligible effect and probably it will obviously have some impact, but I think that's very negligible that the Fed increases rates we get in a situation with that to increase rates 200 basis points, 300 basis points, that's a much more challenging environment. I don't think we get there, but there is a level at which increasing rates and flicks a lot of pain.

I don't think that's in the base case scenario for many people or any people or even 1 standard deviation or 2 standard deviations off the base case. So we feel pretty good about the fact that the market should continue to improve. Janet, that answer your question.

Operator

Our next question comes from Ryan Kenny with Morgan Stanley.

Ryan Kenny

New build out can you just walk through the strategy to improve the funding mix on the deposit side. Any updates on the treasury management build-out and opportunities to win over more noninterest-bearing deposits and operating accounts.

George Gleason

Yes. Jake, do you want to talk about the focus that you've got and the improvements that you've made on the funded versus unfunded ratios of the portfolio or utilization rates on these lines and also talk about the work that you and your team are doing and treasury management in coordination with that to really build up our product services and capture a larger share of core deposit customers.

Jake Munn

Sure, George. I appreciate it. Good Morning. It's a great question. As CIB continues to grow and evolve, obviously, our focus is not only on driving quality loan growth. But at the heart of it is really driving a true relationship banking. Nearly 50% of all of our clients and relationships within CIB are direct single lender deals. If you add in club deals, then less than 1/3 or about 1/3 are broader syndications.

And even with those, we're having great success now in leading those and stepping in as admin agent -- and as a result, we're starting to see really good progress in full wallet. I know your question is deposit focus. But aside from just the deposit side, it's allowing us to really start to cross-sell and provide additional products and services that will generate great noninterest income, fee income for the bank through commodity hedging, interest rate hedging, our capital markets program and then also partnering with private wealth, private client and then treasury management.

The bank continues to put a really big focus and a lot of investment and acquiring top-tier talent across all these business lines, but including treasury management and then also investing in the technology and the products and services that will really move us ahead to be a best-in-class leader from a TM standpoint. So that treasury management functionality the payment rails, the services that Chad and his team are building will be mission critical to continue to serve the growth of CIB and to harvest those lower cost and a lot of times, noninterest-bearing deposits.

We're seeing really good momentum within that harvesting process already. We had over 20% growth within CIB and deposits quarter-over-quarter. And again, as we continue to move out into the market as we push into our CBSF teams, our emerging middle market group that we announced the formation of a lot of these at our heart are true relationship-focused banking platforms, which allow us to continue to drive additional lower cost deposits for the institution as we march forward.

So great progress has been made already, but we're really just at the beginning of the journey as it relates to driving additional deposit growth and interest income for the bank. And so we're excited about it. We're excited about the growth that we anticipate to see here over the next few quarters and then into '27 and '28.

George Gleason

Yes, I would, again, just point you to Page 2 of our management comments, the first page of our communication. And we talk about for really focal points for us that we think are critical to enhancing long-term shareholder in that loan diversification we've talked about already extensively today is number one: Improving that deposit mix and getting more noninterest-bearing and low-cost deposits. Number two: I think you will see steady progress in that regard through 2027 and steady progress in that regard through 2028.

That's a function of really continuing to capitalize on relationships, as Jake said, both in our CIB portfolio and our community banking portfolio. And we're really doubling down that focus and capitalizing on this excellent deposit franchise. We've got across the Sunbelt and getting more core business within that. We're going to grow a lot. We're still going to be doing a lot of CDs but we're going to get that core percentage in volume growing. And I'm pretty confident in that, that you'll see that throughout '27 and '28.

And then as Jake mentioned, not just the deposits, but the fee businesses, as we talked about management comments, we expect Q4 is going to be another our second this year of record fee income. If you exclude the prior quarters and long ago history when we had bargain purchase gains on acquisitions and so forth. If you exclude those quarters, the second quarter was a record quarter of noninterest income. We expect to have another record quarter in Q4. And we expect noninterest income in '27 to be up high single digits versus this year's 2026 number, reflecting that we expect to continue to grow that.

So those things, plus the capital efficiency we've talked about, we think we're a potent combination to really get our stock price moving in a direction that is reflective of our strong earnings that we've inherently put up in the company and expect to continue to put up.

Ryan Kenny

Excellent. So deepening relationships comes with better high-quality fee income and better low-cost deposit mix. What about the efficiency ratio impact? You're approaching 40%. Can you talk about what the right normalized rate is? And as you transition to more of a relationship bank, does the efficiency ratio increase over time?

George Gleason

I think we're going to do -- I think we're going to do some things that actually keep our efficiency ratio in that 30-something range where we have historically been. And we've been spending a lot of money building out CIB. We've been spending a lot of money building out mortgage and treasury and consumer lending and various other customer-facing lines of business.

We've also been spending a lot of money on technology, data modeling and various other things that are behind the scenes that our customers don't see but are critical to delivering the products, services that our customers want and producing the results that our shareholders expect. So we'll continue to spend money on those things. But we're also looking at a lot of the things that we built over the last 3 to 5 years and realizing we can be a little more efficient in those.

So you've seen in our head count in 2024, 2025, 2026, the first quarter of this year, big growth in headcount. And we really started in Q1 really looking at a review of a lot of these things we've built and some of them have been built over a decade, you -- it's like a house, you add on a room and you can close the garage and you add on another room and you put a porch back and you end up with a house that is big enough, but it's not the house that you envision you really want to have, and it's not as efficient as you want and sometimes, you just got to remodel.

And we've remodeled a lot of the business units and the result is over the last 2 quarters, while we have been increasing head count in important areas like CIB and various other areas where we need to be putting more resources, we've net-net reduced head count by about 90-something people, Tim, 94. And that's not a result of getting out of any businesses. That's not a result of any sort of retreat.

That is just a fact that we've looked at a lot of these things we've built over the last decade and realize why weekend. reengineer those units and be much more effective. And at the same time, we're being more effective, delivering better products and services and getting better results we can do it with less cost. So I'm real proud of that. And I think those results will help keep a lid on that efficiency ratio as we go forward and let us continue to have a very, very good efficiency ratio, consistent with our long tradition of being 1 of the most efficient, the most efficient banks in the country.

Operator

Our next question comes from Nicolas Holowko with Raymond James.

Nicholas Holowko

Maybe just following up on a couple of your key strategic priorities that you've been alluding to and that you highlighted at the beginning of the management comments, coming back to the second, the funding mix and improving that over time. I understand you're going to aim to continue to see some progress on that over the next couple of years. But can you just talk a little bit about the progress that you've already seen? And how that ties into the competitive backdrop for deposits and what that means for deposit costs over the coming year?

George Gleason

Yes, happy to do so. And Nick, what I would tell you is we haven't seen much of the progress so far. We've really been in a building stage of building the additional infrastructure and sort of changing the mindset and creating the environment within our company that's going to be helpful to us achieving that. So our treasury management area, for example, was a good treasury management function as far as our customer base before we got in the CIB business.

As we've really begun to emphasize growth in CIB and made that a front on piece of our growth strategies, put that upfront and really pushed it and have started dealing with a lot more larger customers with more sophisticated payments and cash management and other treasury functional needs, we've realized we've got to step up our game and improve a lot. So we've made the staff hires. We have moved forward with a lot of technology things to do that and continue to do so.

And I think the products of that, the benefits of that pretty much all line in the future. And the same in community banking, our traditionally, what we would have called a commercial lender has become a relationship manager in our world with a community banking focus on deposits being as important in managing those deposit relationships are as important as managing the loan relationships, that cultural shift is beginning to bear fruit but it takes a long time to change culture.

And we've been working on that for a couple of years. And really, I think in the last quarter or 2 with some changes we've made in our team there has gotten those things really better articulated and more top of mind for our team members. And I think we're beginning to see the first fruits of results. So it's been a focus. We're much further ahead with our portfolio diversification than we are with our deposit diversifications and enhancements and our fee income diversification enhancements.

But just like you saw record fee income in Q2, and we think we'll have another record in Q4. We're seeing some first fruits on this deposit diversification effort. And we're talking about those things now because their evolutions in our business model that we think you're going to see steadily progress in 2027 and 2028. And we're calling them out so you can help us watch our progress on those things.

Nicholas Holowko

That's great. And maybe just as a follow-up, we've seen such strong momentum across CIB. I mean I think it's really exceeded expectations going back over the past couple of years now. Is there anything there that you would say has surprised you in terms of just the breadth of that opportunity to grow the loan side of the balance sheet. And I guess, to the extent that people are -- have any concerns about the pace of growth there given the strong origination volumes. Just any thoughts on just explaining how we should just take comfort in that strong growth.

George Gleason

The thing that has surprised me the most is, Jake and his team's ability to acquire absolutely top-tier talent and whatever new team we have built, they have been able to go out and get folks that are very experienced and very knowledgeable, very smart, very hard working in that category and those people who have been doing the job for many years and in some cases, multiple decades, have so much respect and such deep relationships in the space they serve that that's been the key to us bringing in so much business.

If customers worked with somebody for a decade and that relationship and that knowledge of the customer's business by the lender is so deep that it really takes on a value of its own. And that guy or gal comes to our team and is on our team and is supported by this infrastructure of support people analysts, underwriter, servicers that Jake has built at CIB, if they come in and they've got all that support and they come into a positive environment, and they've got those relationships, the ability to bring customers over and move to the top of the bank group for that customer is a reality.

And the talent is the key to it. And Jake and his leadership team have just done an absolutely masterful job of picking the right talent, and that right talent is what's letting us achieve this growth and do it in a profitable and high-quality credit quality way that we're doing it.

Jake Munn

And I'd just piggyback there to George, do a great job covering the most important part, which is the people aspect. But when you look at what we've built, again, we now have 9 major business lines that are providing for this growth. These loans are typically pretty granular. If we look at growth over this last quarter, it was supported by 65-plus new relationships originated, 18-plus material upsizes, many of which, to George's point, were opportunities on multibank deals for us to take the admin agent lead role.

It really is a very granular book of business, spanning those 44 NAC that are mentioned in the management comments. And so relationship-focused first I'm getting in there understanding the sponsor maybe behind the deal, understanding and having a true relationship with the management team where we can be really a strategic adviser on all things banking to them.

So not only providing the loan products, but if they have depository needs, if they need introduction to our private wealth team, interest rate hedging and commodity hedging, that surrelationship focus is really where we where we aim to be and where we're really shining. And so great quality talent, but also having the processes, the procedures and the systems in place to appropriately scale and scale without giving up any sort of credit quality.

In our management comments, we point out 0% past due within CIB at the end of the quarter, 0% on the trailing net charge-offs. We're really proud of that. We're being very selective on the deals that we're booking. We're staying away from the higher risk industries that we've mentioned on previous calls, and we're focused on finding and sourcing and developing relationships with companies that are well capitalized that are lower leverage, and that had great support behind them in the form of sponsors or family offices, private equity firms, you name it.

So it's a recipe for success. And I think we're just starting to see that bear fruit. We'll see continued growth with these newer initiatives. There's additional initiatives on the horizon that we're excited about. I look forward to sharing with you in the forthcoming earnings calls.

Operator

Our next question comes from Janet Lee with TD Cowen.

Sun Young Lee

Sorry for the technological missed earlier. If we take your 2027 guidance. Quick and Dirty math shows that 2027 PPNR may be down a little bit versus 2026. But obviously, you've talked about like efficiency ratio staying very strong and you're focused on improving your ROCE. How should we think about the return profile in 2027 versus about 11% in the third quarter.

Tim Hicks

Yes. Janet, I think we would be hopeful to beat your PPNR number that you've come up with. Obviously, that's our goal every year is to improve upon that. I think we've achieved over $1 billion of PPNR for several years now. And where we have seen some accretive additions is in our opportunistic repurchases. So you can see our repurchases during the first -- the last part of the September and first part of October have been really accretive to current tangible book value. That obviously impacts the share count that obviously impacts EPS.

And we're -- as you're reading in our management comments, 1 of our top 4 priorities is to look at our capital efficiency and look at our tangible common equity and our CET1 and our risk-weighted asset density and make sure that we're thinking through all of those items when we're allocating capital. So I think our return profile is a high focus of ours, and we want to have that going in the right trajectory, and that's all those 4 items that we mentioned on the front page are really to outline our focus on those areas.

Jan, you had 1 other comment in your -- in 1 of your notes that I wanted to just highlight on, and that's our tax rate. And you indicated that, that was a low-quality win. I want to just make sure that we are being transparent in our tax rate -- our tax strategy. We work hard on reducing that tax rate. You can see our municipal security increase. Our investment team is probably 1 of the best in the industry.

Christie Harper is 1 of the best negotiators in the bond market, and she has found all sorts of municipal bonds that are high quality, good yielding tax-exempt bonds that impact not only net interest income but also impact our tax line item.

In addition, our tax team really focuses on renewable energy tax credits -- they work hard on doing that and they find very attractive yielding tax credits that help reduce our tax rate. So we work hard on every line item in our -- on our financial statement, and that tax rate is not declining because of happenstance. It's hard work from our investment team and hard work from our tax team. So I want to just make sure that, that was transparent. We give you good guidance on where we expect that tax rate to be.

George Gleason

Tim, I'll just say publicly, I think you're doing high-quality work. All right. Thank you, Jan.

Operator

Our next question comes from Stephen Scouten with Piper Sandler.

Stephen Scouten

Tim, maybe you kind of touched on this a little bit with your last comment. But the securities investments that you guys have been making, can you give us a feel for the strategy there? And if these investments should kind of continue at a recent pace? I mean you guys have a really strong track record of making timely purchases in -- really since the great financial crisis. And so just kind of curious what you guys are thinking and why you think this is the right time to be making these investments?

George Gleason

I'll address that, and then Tim can add on. One of the things we work to do, Stephen, is to have a pretty constant cash flow from our securities portfolio. So we don't get locked in just forever to certain things. So that portfolio is generating about $100 million a quarter in cash flow. And the good news about that is over the next 5 quarters, through the end of next year, so what we've given guidance on. We think that's $100 million a quarter more or less, maybe $90 million, maybe $110 million in a particular quarter.

But around $100 million average and the average roll-off rate on those securities is about 3.5%. So you've seen that portfolio yield going up very nicely as the bond market has moved higher this year, and we've been able to roll off securities every quarter, every month and reinvest those in higher-yielding securities. And we gave you some guidance in the management comments on what we think that looks like for Q4 and that is another nice increase in that portfolio.

So we think you'll continue to see some improvement in that yield may not be as dramatic as the Q2 to Q3 or Q3 to Q4 improvement, but some improving trend in that yield over the next year just because we'll have the opportunity to reinvest this roll off at much improved rates from the 3.5% plus or minus rate that's rolling off. from the portfolio. So liquidity and cash flow are important elements of the portfolio.

And then as Tim mentioned, our team has a long history going back to the great financial crisis and even before of finding opportunities that have low risk, very low risk. A lot of these are government-guaranteed mortgages that underlie them or so forth, but very low risk and the structure being a little out of favor or not being as broadly pursued by others, gives us a chance to get a better yield with actually lower risk than a lot of the alternative investments.

And we've got a very risk sensitive team managing the portfolio and a very yield-sensitive team managing the portfolio and they're just doing a good job of getting us good returns on that portfolio relative to the risk profile of the portfolio. So Tim, you may want to add something.

Tim Hicks

Yes. I mean, Steve, in addition, I mean, when we talked about capital efficiency, this is 1 of the areas that we're referring to, the tax-exempt and taxable securities are very efficient from a capital standpoint, from a risk-weighted asset standpoint. A lot of those taxable securities are 20% risk-weighted or less. And so the return on those when you look at a return on risk-weighted assets is extremely high. So that's just 1 of the many factors.

Obviously, the duration and organic loan growth and everything else that we've been talking about are considerations and when we're talking about capital efficiency. But the bond market recently has provided some attractive opportunities for good yields. And so we've got the team with the expertise and the risk tolerance -- the appropriate risk tolerance to look for those opportunities and do it in an accretive manner.

George Gleason

Yes. And certainly, the mark-to-market adjustment on the portfolio in the last quarter was noteworthy. But you had a 25 basis point move in the Fed funds rate and that an 82 basis point move in the quarter in the 10-year yield. And that 82 basis point quarterly move in the 10-year yield was the largest in like 3.5 decades more or less. And I think the last time there was a near comparable move in the Treasury was part of a 225 basis point Fed move, not at 25 basis points.

So the change in Chairman -- Fed guidance combined with just the quantity of treasury debt coming to the market and the inks that slipped through the markets at various times about funding the data center build-out and the AI infrastructure and the amount of securities coming there has really created some unusual moves in the shape of the yield curve. And that has given us opportunities to add new securities that we think will be even better for our portfolio going forward.

And we're not terribly concerned about the mark-to-market adjustment because we don't have any plan to sell these securities and we like the fact that the yield curve has shifted where it gives us a good entry point for new purchases.

Stephen Scouten

Yes. Good color. I know your team is always very thoughtful and opportunistic there. So that's helpful. Just 1 last clarification point. I don't think the chart is still in the management comments, but of the 84% of the variable rate loans, how many of those should we expect to be able to migrate higher on each subsequent rate hike? Or any like kind of below where those adjustments would take effect?

George Gleason

There is a fraction of 1% that have a ceiling in them that is relevant. So there's tons of headroom. We're already thinking about the next cycle with Feds to increasing, whether that's no more 1, 2 or 3 more and thinking about cutting. So we're already worried and thinking about repositioning our floors on new originations to be protective in that next cycle of rights will probably inevitably come in 2028 or 2029.

So we're working on that. That's not relevant now. So we have taken that floor chart out for a while. -- when we get to a peak and folks start speculating about when the next Fed rate cut is going to be, I'm sure, Tim, and Jay and the team can dust that chart back off, and we'll put it back in because it will be relevant at that point in time.

Stephen Scouten

Given how sensitive you are and how much cheaper downside protection has gotten with this move in rates, is that something you think more about any more sophisticated hedging and increasing that downside protection given your asset sensitivity?

George Gleason

We sell interest rate hedges, but we typically, as you know, Steven managed our interest rate risk pretty much on balance sheet in real time with real dollars. And that's worked really well for us over many decades. And we're always open to new things and adjusting our strategy where it's appropriate, but it's not something we're focused on right now.

Operator

Our next question comes from Timur Braziler with UBS.

Timur Braziler

I guess, first, any additional color you can provide on the Rad loan in San Diego behind some of those dealings over the past quarter. Clearly, it's been extended for 3 years. Principal has been reduced by $121 million. I guess what's changing behind the scenes or maybe what's giving you greater confidence that leasing activity is going to pick up here?

Are you seeing anything on the ground that's kind of giving you some greater confidence there? Is there a change in kind of market strategy that they're approaching, I guess, beyond just getting 3 more years there was giving you greater confidence that, that loan or that property is going to start leasing up here sooner than later.

George Gleason

Yes. I'll make a couple of comments, and Brannon, I want you to weigh in on this. Well, obviously, first, the fact that the mezz lender and the equity jointly contributed a combined $100 million of additional capital to the project isn't unquestionable statement from them that they're committed to this project and committed to seeing it through. There was a lot made by 1 of our analysts about the fact that there was a 45-day extension before that permanent extension was in we view that 45-day extension is incredibly positive.

Our structure of our loan extension was agreed to before that 45-day extension was in the 45-day extension was really to allow the mezz lender and the equity time to negotiate and work out an agreement and a plan among themselves for future capital contributions and how that would be handled if needed. So the fact that the guys had already agreed to put in $100 million and spent 45 days going back and forth among themselves talking about how they're going to share responsibility for future capital contributions.

We view as a double tap on the fact that they're committed. $100 million is committed spending legal fees over $45 negotiating how you handle the next capital contribution, if needed, says these guys are pretty committed to this project. They're just not putting another $100 in and hoping it works and going to walk off they're both the equity and the mezz have told us they're deeply committed to the success of the project.

The reason that they're deeply committed to the success of this project is a great asset. It is an absolutely great asset. And I listened to a lot of commentary that different brokerage firms or real estate investment firms put out on the market. And 1 of the themes you're hearing over and over and over again, if you listen to those commentaries in the last 9 months this year is quality assets have value and even in markets that are tremendously screwed up from a supply-demand metric, quality assets have value the old less desirable assets may have no value.

They may be worthless, but high-quality assets continue to have value and trade and so forth. So this is an absolute great asset that is going to lease up and we'll have a successful outcome at some point. It's not a question of if. It's just a question of when. So the quality of asset, the commitment of the sponsor are just super encouraging and white pass credit on our books.

I'll let Brannon weigh in on kind of what adjustments they're making at the sponsorship level to strategy and what leasing looks like and activity. So Brannon way in add anything that I missed on that.

Paschall Hamblen

Yes, happy to, George. I mean bottom line is, look, you don't put $1.2 billion into a project and not really keep focused. And I think we've laid out for you since mid-2024, how that investment has increased. And then again, in late 2025, you had a new team come in, and dive into the asset with extremely energetic focus.

We've talked about the retail leasing, which there's a lot of other space to lease, but getting that piece of the project activated actually getting those tenants signed up, getting them in and developing a program for the project on the ground to, as you noted, so important. And they've done a great job of that. They've also expanded the world they're pursuing tenants.

And I mean, obviously, continued focus on in-market life science and office users. But out of market in different projects, clinical research, pharma, tech, AI, defense, every possible avenue that would make sense there. And look, we've been transparent. It's clear that lab demand is not what it was, but they are still tracking several lab tenants that are of size in the market, and we'll continue to do that. And then a lot more focus on the office piece and they're tracking a great deal of square footage there.

So they've done a really good job in terms of identifying the targets, the opportunities, expanding that set and then being very communicated to us around what the opportunity is and where those are and we're encouraged at the opportunity that's there. So tremendous capital infusion over the last 2 years and then the really high energy focus around acquiring tenancy, activating the tenancy that we have already acquired. And and improving the marketability of what George appropriately defined as just a exquisite asset. So we're encouraged by all those developments.

Timur Braziler

Okay. Great. And then maybe 1 more, if I can, just on the allowance, I guess, a, for CIB production, what is the reserve that's kind of being booked on that production. And then if you look at the allowance to loan ratio that's been marching down, call it, 4 basis points per quarter for the last couple of quarters. Is that a similar trajectory that we should kind of ink through here, assuming status quo from a credit standpoint?

George Gleason

Yes. We're going to do the right thing every quarter on the allowance, whatever the models and the econometric models and our individual models on every loan suggests. And on CIB, there's -- on average, those probably have a lower allowance percentage than our RESG loans but it varies quite a bit within CIB loans. So you can't give you a 5 basis point or 10 basis point range. And so that's the allowance for a CIB loan.

It varies quite a bit and that's driven by our models for that loan overlaid with the econometric model selections that we use in our scenario selection process for our ACL. So Tim, add additional color and comment.

Tim Hicks

Yes, Timur, I don't have that at my fingertips. But if you go back to our 10-Q, we do disclose by broad categories, what our ACL is for C&I loans, specifically, you can refer to that. for the ACL percentage. It's primarily going to be CIB-related. But to George's point, every business line is is slightly different. And as Jake pointed out, his credit quality metrics are extremely, extremely good. So I think that's really all I would add there.

Operator

I'm showing no further questions at this time. I'd like to turn the call back to George Gleason for closing remarks.

George Gleason

All right. Thanks, Liz. Thank you all for joining the call today and all the great questions. We really appreciate the questions. We appreciate your interest in OZK. Thank you. Have a great day. That concludes our call. We'll talk to you in about 3 months. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.