Bank of Ozarks nets $54.5M

2Q earnings a record, beat forecasts by 2 cents a share

Graphs showing the second quarter finances of Bank of the Ozarks
Graphs showing the second quarter finances of Bank of the Ozarks

Bank of the Ozarks on Monday reported a record net income of $54.5 million in the second quarter, up 21.7 percent from $44.8 million earned in the second quarter last year.

The Little Rock bank earned 60 cents per share for the quarter, beating an estimate of 58 cents according to a survey of eight analysts conducted by Thomson Reuters.

Bank of the Ozarks shares rose $2.43, or 6.6 percent, to close Monday at $39.21 on the Nasdaq exchange.

The bank continues to grow through its real estate specialties group, a lending arm that was started 13 years ago. It focuses on asset quality, profitability and growth, George Gleason, the bank's chairman and chief executive officer, said Monday during a conference call.

The division has had only two loans that resulted in losses in 13 years, Gleason said. Its total losses since inception has been $10.4 million, Gleason said.

The real estate specialties group accounts for almost 70 percent of the bank's total nonpurchased loans, Gleason said.

Bank of the Ozarks expects to increase its loans for all of this year by $3.5 billion, up by $500 million from the projection given three months ago, Gleason said.

Bank of the Ozarks had $12.3 billion in assets at the end of the quarter, up from $8.7 billion in the second quarter last year.

As of June 30, Arvest Bank of Fayetteville is the largest bank in the state, with $16.4 billion in assets.

Bank of the Ozarks expects to close next week on its two acquisitions announced last fall -- Community & Southern Holdings of Atlanta and C1 Bank of St. Petersburg, Fla. Bank of the Ozarks has received regulatory approval from all three of its banking regulators for the two purchases.

The two banks have a total of about $6.4 billion in assets, which will raise Bank of the Ozarks' assets to about $18.7 billion, making it the largest bank in Arkansas.

With its continued growth, it's possible that Bank of the Ozarks could have close to $20 billion in assets by the end of this year, Gleason said.

Bank of the Ozarks closed last year with $9.9 billion in assets.

"At that time, they were trying to stay below the threshold of $10 billion that makes [regulatory scrutiny] more difficult," Matt Olney, a Little Rock analyst with Stephens Inc., said in an interview. "And they're going to be close to $20 billion in assets at the end of this year. You don't see that too often, a bank almost doubling [in assets] in a year. That's very unusual."

It's possible that Bank of the Ozarks could announce another acquisition by the end of the year, Olney said.

"They've averaged about two [bank acquisitions] a year the last few years and they haven't announced anything this year," Olney said. "So on the one hand, you could say they're probably due for something this year. But on the other hand, you could definitely argue perhaps this year they'll take the year off. But I would bet on them acquiring something next year."

Michael Rose, an analyst with Raymond James in St. Petersburg, Fla., said in a research report Monday that the second-quarter report should be positive for Bank of the Ozarks' shares.

Rose noted in the report that 21.8 percent of the volume on Bank of the Ozarks shares is from investors shorting the stock "and that has increased notably in recent months."

The stock fell as low as $33.66 on May 4 after reports by an investor at a major conference that he was shorting the stock, a method of profiting from a stock that the investor is betting will fall in price.

The stock has recovered somewhat but still is not trading at April levels of more than $44 a share.

Business on 07/12/2016

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