Bank OZK loan originations reach highest level since 2017

Arkansas-based bank closed $2.21 billion of new loans in Q3

National /
Oct.October 22, 2021 03:30 PM
George Gleason (Bank OZK)

George Gleason (Bank OZK)

Bank OZK, one of New York and Miami’s most active construction lenders, saw loan originations reach their highest levels in nearly four years.

Arkansas-based Bank OZK’s Real Estate Specialties Group closed $2.21 billion of new loans during the third quarter, marking the highest quarterly level of originations since the fourth quarter of 2017. The bank also recorded almost zero write-downs on problematic loans.

The mid-size bank, led by George Gleason, is closely watched by the real estate industry as a bellwether of the appetite for ground-up construction loans. Bank OZK, formerly known as Bank of the Ozarks, has also been the target of short sellers who say the bank’s out-of-market loans and real estate-heavy portfolio could be problematic in a market downturn.

Bank OZK showed little signs of distress in the third quarter, according to a Friday earnings call.

Originations in 2021 will likely exceed the record of $5.67 billion in 2019, the bank said. Its RESG division closed 23 loans with an average size of $96 million in the third quarter.

“The market is pretty active right now,” Brannon Hamblen, head of the bank’s RESG division, said on a third quarter call with analysts. “There are a lot of people trying to get a lot of transactions closed after a quieter year in 2020.”

Bank OZK did not discuss its New York City loans — the bank’s largest market— on the call. In its accompanying management comments, Bank OZK mentioned that loan volume in the city will likely fall in the short-term.

“The volume of new opportunities meeting our standards in the market (NYC) has not been as great in recent years,” the bank said.

Bank OZK’s RESG loan commitments in the NYC MSA fell to $3.87 billion in the third quarter from its high of $6.95 billion in the fourth quarter in 2018. The bank also closed its only deposit-taking branch in New York, but is keeping its local real estate lending office, according to management comments.

Hamblen, speaking generally, said the bank has seen a lot of lending opportunities for multifamily projects, mixed-use projects and even office developments.

Bank OZK’s RESG division reported a dip in loan repayments from the previous two quarters. Borrower repayments dropped to $1.34 billion from $1.68 billion in the second quarter. The company said some loan repayments expected to occur in the third quarter were pushed into the fourth quarter of 2021. Yet, the bank still expects repayments in 2021 to exceed 2019 levels, according to its management comments.

Bank OZK reported $130.3 million of net income, a 19.3 percent increase from the third quarter of 2020.

The company also set for new initiatives in the third quarter, including building out an “Equipment Finance and Capital Solutions Group” to provide equipment financing and lease structures. In the second quarter, the bank started an asset-based lending group.

Bank OZK’s stock was down 2 percent to $44.52 midday Friday.





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