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Bank of the Ozarks: King of the Regional Banks

May 03, 2011 5:58 AM ETBank OZK (OZK) Stock3 Comments
Stephen Rosenman profile picture
Stephen Rosenman
1.52K Followers

Jim Cramer compared Hudson City Bancorp (HCBK) to Bailey Bros. Building & Loan featured in the movie It’s a Wonderful Life. He should have looked further south for a more apt match and chosen Bank of the Ozarks (OZRK), a truly impressive bank based in Arkansas that has been taking the South by storm. I've looked at a host of great regional banks, First Citizens BancShares (FCNCA), Home BancShares (HOMB), Umpqua Holdings (UMPQ), New York Community Bancorp (NYB), BB&T (BBT), and Valley National Bancorp (VLY) in a series of articles (here, here, and here). None holds a candle to OZRK.

The company's CEO, George Gleason, has catapulted Bank of the Ozarks into a significant regional bank with over $3 billion in assets. It's a remarkable story when you consider that in 1979, Mr. Gleason-- then aged 25-- bought a controlling interest in the bank, an entity holding only $28 million in assets at the time. Through a series of acquisitions and bank expansion, OZRK has grown to 114 offices throughout Arkansas, Texas, Georgia, North and South Carolina, Alabama and Florida.

Recently, the bank has been acquiring failed banks from the FDIC. The transactions are advantageous: the FDIC guarantees at least 80% of the losses on each loan, the acquirer makes favorable net interest margin spreads (OZRK has a whopping NIM of 5.61% due in large part due to these covered loans), and OZRK expands at little cost. OZRK has funded most of these acquisitions with money made with through the bargain gains made by the deals themselves. The company hasn't issued a single share fund growth: it's still the same 17 million shares unchanged since 2006. With each transaction, OZRK has actually gotten stronger. Per SEC filings:

"The Company’s ratio of common stockholders’ equity to total assets was 10.06% as of

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Stephen Rosenman profile picture
1.52K Followers
Stephen Rosenman enjoys analyzing the financial health of companies and pointing out areas the market is either not recognizing or ignoring. A long time investor, I put my money where my mouth is. That's why I'm passionate about my positions. I trumpet companies I believe in and back my articles up with data and graphs. Every now and then, I'll write something a little goofy to lighten it up...

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