Bank OZK’s loan growth slows in Q2 amid cooling markets

Bank OZK said it saw an unexpected increase in repayments on loans

George Gleason (Credit: iStock)
George Gleason (Credit: iStock)

Bank OZK, one of the country’s most aggressive condo construction lenders, signaled in its most recent earnings report that its real estate lending growth is slowing down.

The bank’s organic loan portfolio increased 11 percent in the second quarter of 2019, year-over-year. That’s after increasing 28.6 percent in the second quarter of 2018, compared to the previous year. The Little Rock-based regional bank said in a conference call with analysts that its future loan growth is expected to slow down due to an increased amount of repayments on its real estate loans.

During the conference call, Bank OZK CEO George Gleason said the bank was surprised by how quickly some of the projects were getting repaid. In the second quarter, the bank reported repayments of $1.54 billion in its real estate lending division, up from $1.1 billion in the first quarter.

Bank OZK reported second quarter net income of $110.5 million, down 3.7 percent from the same period of 2018, partly due to these repayments.

The bank had $18.2 billion in deposits at June 30, a 1.6 percent increase from $17.9 billion at June 30, 2018.

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Gleason said on the conference call that the bank is seeing fewer opportunities for construction loans in New York City since there are fewer new projects and competition from banks and debt funds is increasing.

“Lenders in certain markets are very aggressive on price,” Gleason told analysts. “We’ve been clear without exception that we are not going to sacrifice our credit standards.”

With just under $23 billion in assets, Bank OZK is one of the largest and most aggressive condo construction lenders in Miami, Los Angeles and New York City, lending at a time when other banks are pulling back.

The bank reported no major write-offs on its real estate loans in its most recent quarter. In the third quarter of 2018, the bank had to write down two real estate loans it had made about a decade ago which caused its stock to plummet that day by more than 24 percent.

Critics worry Bank OZK is being overly aggressive at a time when condo sales have slowed down in New York and Miami.

The bank’s stock was up 3 percent to $29.57 at 1:30 p.m. on Friday.

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