- While many big banks stay away from construction and land development loans--considered one of the riskiest industries leading to a disproportionate share of bank failures--Bank of the Ozarks (NASDAQ:OZRK) embraces the sector, Bloomberg Businessweek reports. Eighty percent of Ozarks’ portfolio is in real estate, and half of that is in construction and land development.
- George Gleason, its CEO, bought in 1979 what was then called Bank of Ozark, which had $28M in assets, with $10,000 in cash and a $3.6M loan. The bank now has $22B in assets.
- One way OZRK expanded is through acquisitions.After the financial crisis, OZRK bought seven failed banks that the Federal Deposit Insurance Corp. had closed. Profit almost tripled from 2009 to 2011.Since 2014 profit has risen almost fourfold with return on assets that's double the industry average.
- Construction loans are typically funded with layers of debt. Ozarks goes for the first, least risky, part: a loan that’s secured by a lien on the property. It also requires developers to put their own capital into the deal first. At the end of 2017, the typical Ozarks loan covered $49 of every $100 spent, with the developer having to come up with the other $51, according to regulatory filings.
- OZRK -0.36% in late morning trading.
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Original article