Bank of the Ozarks has gone on a rapid buying spree that will make it the largest bank in Arkansas in a matter of months.
On Oct. 19, the Little Rock-based bank agreed to buy Atlanta-based Community & Southern Bank, which has $4.4 billion in assets, making it the largest acquisition ever by Bank of the Ozarks.
On Monday, Bank of the Ozarks announced that it would buy C1 Bank of Tampa, Fla., which has $1.7 billion in assets. Bank of the Ozarks has made 15 acquisitions since 2010.
After the two deals close next year, Bank of the Ozarks' assets will balloon from $9.3 billion to $16.3 billion at the end of September, according to projections by Matt Olney, a Little Rock banking analyst for Stephens Inc.
Olney owns no stock in Bank of the Ozarks. Stephens says it intends to seek compensation for investment banking services from Bank of the Ozarks in the next three months.
Arvest Bank of Fayetteville is now the largest bank in Arkansas with almost $15.6 billion in assets in the third quarter. If Arvest grows through the third quarter next year at the same pace as it grew from the third quarter last year, it will have $16.25 billion in assets at the end of September 2016.
An Arvest spokesman did not have the information available Friday to comment about projected growth for the bank.
Olney projects Bank of the Ozarks at $16.8 billion in assets at the end of next year on the basis of its natural growth and not figuring for other acquisitions. He projects it to be at $21 billion in assets at the end of 2017.
"This is a bank that is going to continue to grow," Olney said. "It's going to hit $20 billion pretty quickly. It's going to hit $25 billion to $30 billion. It's going to cross these thresholds pretty quickly in the next few years."
At the end of 2013, Bank of the Ozarks had less than $5 billion in assets, Olney noted.
"Now you're talking about $16 billion [in assets]," Olney said. "Two or three years from now, it wouldn't surprise me at all if this bank was well above $30 billion. So I think they could double again."
It isn't a matter of Bank of the Ozarks trying to be the biggest bank in the state, said Randy Dennis, president of DD&F Consulting Group, a bank consulting firm in Little Rock.
"They are looking to drive performance," Dennis said.
There are two reasons for Olney's expectations for growth at Bank of the Ozarks.
One is the bank's real estate specialties group, which focuses on making relatively high-dollar, high-quality loans almost anywhere in the country, Olney said.
"The other reason is [acquisitions]," Olney said. "With [acquisitions] you can get bigger much quicker. A lot of banks can do acquisitions. But very few banks can do acquisitions that are [profitable]. All these deals that Bank of the Ozarks has announced have been [profitable]."
A Bank of the Ozarks executive was not available Friday to discuss the bank's growth.
What has catapulted Bank of the Ozarks toward being the biggest bank in the state are the two acquisitions it announced recently.
The price that Bank of the Ozarks will pay for C1 Bank is one of the "10 priciest of the year," American Banker reported. Bank of the Ozarks will pay two times book value for C1 Bank, whereas most banks sell at 1.5 times or less.
C1 Bank will increase Bank of the Ozarks from 10 branches in Florida to 42. C1 Bank also has unique and proprietary technology, Olney said in a research brief.
"We believe the ultimate success of this acquisition hinges on the ability to integrate this technology to [Bank of the Ozarks' technology]," Olney said.
Dennis said he wouldn't second-guess George Gleason, the bank's chairman and chief executive officer.
"That's not a smart thing to do," Dennis said. "They have been very strategic in their acquisitions."
Community & Southern also has one branch in Jacksonville, Fla., as well as 47 branches in Georgia. When the Community & Southern deal closes, Bank of the Ozarks will be seventh overall in the Atlanta market, said Chris Marinac, head of research at FIG Partners in Atlanta.
Olney said he wasn't surprised at the announcements.
"On [Bank of the Ozarks' third-quarter conference call] they signaled that they were looking at doing multiple acquisitions," Olney said.
There were two other deals that Bank of the Ozarks came close to landing this year, Gleason said on the conference call last month.
"We've had a couple of deals that we worked on and got really late in that due diligence and other findings very late in those processes caused those deals to not be transactions that could be safely done," Gleason said on the call. "We at all times have a number of transactions that we are working on. And we are working on a couple of transactions now that we would very much like to get to the table."
Acquisitions are a focus for Bank of the Ozarks, Gleason said during the call.
"We've got a lot of resources devoted to [acquisitions]," he said. "We think there are a lot of good opportunities out there if we can get them to the end zone. Our tendency at this stage is to be looking at larger transactions, mostly from $700 million or $800 million [in assets] on the small side to $4 billion or $5 billion on the larger side."
A Section on 11/14/2015