Bank of the Ozarks stock fell Thursday morning after the Arkansas bank suggested during a conference call that its real estate lending growth could slow down, following its release of strong earnings late Wednesday.
The Little Rock-based bank’s CEO, George Gleason, said during the call that pricing is getting more competitive for real estate lending and the flow of quality deals has slowed.
The remarks are significant for the larger real estate lending landscape since Bank of the Ozarks is one of the most active construction lenders in the country. In New York, Los Angeles and Miami, the bank is ranked as one of the largest construction lenders, according to research by The Real Deal.
Despite the stock decline (down 9 percent to $41.85 as of 2:30 p.m.), the bank reported an increase in net income, deposits and overall lending. Net income increased 26.8 percent in the second quarter to $114.8 million on a year-over-year basis, in line with analysts expectations. Total loans, including purchased loans, increased to $16.8 billion at June 30, 2018, a 10.4 percent increase from $15.2 billion at June 30, 2017.
In addition, the bank’s ratio of nonperforming loans, or loans 30 days or more past due as a percent of total loans, decreased to 0.10 percent at June 30 compared to 0.11 percent at June 30, 2017.
As Bank of the Ozarks has grown its loan portfolio, some analysts have expressed concern over whether the bank’s condo lending is sustainable during a down cycle. The bank has said it is a conservative lender with low leverage and is always the sole senior secured lender.
Next week, Bank of the Ozarks will change its name to a more geographic ambiguous name Bank OZK to highlight its evolution in recent decades “from an Arkansas community bank into a much larger regional bank with nationwide lending businesses.”