On Tuesday, Little Rock-based Bank of the Ozarks reported record earnings of $89.2 million in the first quarter this year. It is the largest bank in the state, with $19.2 billion in assets.
"We are $19 billion [in assets] now, and going from $19 billion to $50 billion, that's a big leap," George Gleason, the bank's chairman and chief executive officer, said last week in answer to a question from an analyst during a conference call. "We are at least three years away from getting there, and that would be a fastest-case scenario."
At that pace, Bank of the Ozarks would be near $30 billion in a year, $40 billion a year later and $50 billion at the end of the third year.
It may take a bit longer than three years for Bank of the Ozarks to get to $50 billion in assets, said Garland Binns, a Little Rock banking lawyer.
"[That's because] they are very selective in their acquisitions," Binns said.
The bank's selective approach was highlighted in the conference call Tuesday coinciding with the bank's quarterly-earnings report.
Gleason said Bank of the Ozarks considered a couple of acquisitions recently that would have been immediately profitable but they didn't have the impact the bank preferred.
A couple of other possible deals were considered but the sellers wanted too much to sell their banks, Gleason said.
The bank's management describes its acquisition strategy as being "disciplined and active," he said.
There are several other considerations Bank of the Ozarks makes about acquisitions, management said, such as:
• Analyzing whether the bank can grow similarly without making a particular purchase.
Every acquisition the bank makes distracts management from other things they would do without the deal, Gleason said.
"If we devote the same amount of energy and resources to our [internal] growth, will we get better results than we will get with an acquisition?" Gleason said.
• Determining how new management would fit with existing management.
Gleason said he is extremely comfortable with the bankers leading Bank of the Ozarks' business in Florida, Georgia, the Carolinas, Arkansas and Texas. So another acquisition in those markets likely would be counterproductive.
"So in some respects, doing a transaction in New York or California or Colorado or Illinois or Washington state, markets where we don't have much if any retail banking presence, is simpler than doing one now in the states where I have finally got our teams really well developed," Gleason said.
Bank of the Ozarks has an appetite for transactions in New York, Gleason said, if they are done with the right leverage and right markets.
Because of its business with developers across the country, Bank of the Ozarks is a significant lender in cities such as Miami; Dallas and Austin, Texas; Seattle; Denver; Chicago; and Nashville, Tenn.
Matt Olney, a banking analyst in Little Rock with Stephens Inc., said in a research brief that he expects Bank of the Ozarks to return to acquiring banks this year. Its two most recent purchases closed in July.
While Bank of the Ozarks continues to have a dialogue with potential acquisition targets, it will be more focused on pursuing financially attractive banks without considering whether they fit strategic needs, Olney said.
Two other publicly traded banks in Arkansas are growing through acquisitions but trail Bank of the Ozarks in assets.
Home BancShares of Conway will be at $13.5 billion in assets when its purchase of Stonegate Bank of Pompano Beach, Fla., closes late this year. Simmons First National Corp. also will have about $13.5 billion when its purchases of three banks close this year.
Arvest Bank of Fayetteville has more than $17 billion in assets but hasn't made an acquisition recently.
Plans by Bank of the Ozarks to reorganize and eliminate its bank holding company, which it also announced last week, could help streamline future purchases. It also should improve the bank's efficiency.
Doing the reorganization would do away with the Federal Reserve as a regulator of the holding company, leaving only the Federal Deposit Insurance Corp. as the bank's federal regulator. The bank estimated that it could have closed on the two 2016 deals two months sooner without the duplicate federal regulators.
But it's unlikely that banks with a holding company, but which aren't publicly traded, would be interested in following Bank of the Ozarks' lead, Binns said. Those banks use their holding company for various purposes, and eliminating the holding company probably would not be beneficial, Binns said.
SundayMonday Business on 04/16/2017