Bank of the Ozarks of Little Rock, the largest bank in the state, with more than than $18.4 billion in assets, has grown its New York business since 2011 to more than $4.3 billion in funded and unfunded loans.
And in less than two years, Conway-based Home BancShares has tripled the size of its New York business to about $900 million, a banking analyst said in a recent report.
Opportunities for growth drew the banks to the Big Apple. Bank of the Ozarks was attracted by construction loan opportunities, and Home BancShares moved into the market after purchasing the assets of a Puerto Rico-based bank.
Since early November through Thursday, the two banks' stocks have skyrocketed.
Bank of the Ozarks shares are up 50 percent since Nov. 3. Home BancShares stock has climbed 33 percent since Nov. 2. Home BancShares is the third largest bank in the state with $9.8 billion in assets.
Bank of the Ozarks has two offices in New York City, but will consolidate them next month into one larger, full-service branch in Rockefeller Center, said George Gleason, the bank's chairman and chief executive officer.
That office has about $400 million in deposits.
New York is the largest lending market for Bank of the Ozarks.
"We are probably one of the dominant, if not the top, construction and development lenders in New York," Gleason said.
About $2.7 billion of Bank of the Ozarks' New York loans have been funded. The remaining $1.6 billion will be funded as construction progresses, Gleason said.
Florida is Bank of the Ozarks' second largest lending market with more than $2 billion in loans, followed by Georgia with more than $1.5 billion and Arkansas and Texas with more than $1.2 billion in loans each.
Gleason estimated that Bank of the Ozarks does business with 80 to 90 of the top 100 real estate developers in the country.
"These developers do business all over the country and, in many cases, all over the world," Gleason said. "So we do business with them across the country."
Bank of the Ozarks is a significant lender in other cities, including Miami; Dallas; Austin, Texas; Seattle; Denver; Chicago; and Nashville, Tenn., Gleason said.
Bank of the Ozarks has 14 employees in New York, but its more than 75 employees in the bank's real estate specialties group based in Dallas work on New York business, Gleason said.
Bank of the Ozarks is always the senior secured lender on a project, funding an average of about 42 percent of the project, Gleason said.
"We're the last guys to fund and the first guys to get paid off," Gleason said. "We're always going to be the lowest risk position in every project we do. And we're always going to be at a level of risk that is extremely conservative."
The bank gets the loans because of its employees' expertise, Gleason said.
"We do very complex transactions," Gleason said. "Because of that we can get the transaction at much lower risk. And we get paid more than the typical bank gets paid."
Home BancShares, which owns Centennial Bank offices in Arkansas, Florida, Alabama and New York, started its Centennial Commercial Finance Group when it acquired $289 million in loans from Puerto Rico-based Doral Bank early last year.
Home BancShares hired Chris Poulton, a former executive with Doral Bank, to lead the office.
That portfolio has grown to about $900 million, or almost 10 percent of Home BancShares' total assets, Brian Martin, an analyst with Atlanta-based FIG Partners, said in a report after a meeting this month with senior leadership of Home BancShares' New York office and FIG's research team and investors.
There are 90 loans in the portfolio with about 50 clients, Martin said.
Home BancShares and Poulton agreed to start a loan office in New York in April last year, Tracy French, chief executive officer of Centennial Bank, said in an interview.
About half of the original loans have paid off, French estimated. The rest of the $900 million in loans have been generated since April last year, French said.
"We're extremely pleased with how the process has gone," French said. "It has allowed our group here in Arkansas, including our loan committee, our management staff and our board, to work with [Poulton] and his team. The budget numbers there and the things we thought would happen have panned out to be pretty close to right on point."
Management's beginning goal for the New York office was to grow the portfolio to $1 billion to $1.5 billion with a 2 percent return on average assets, Martin said in his report.
"Looking forward, we expect the portfolio to grow to about 15 percent of assets," Martin said. "We estimate the existing team has the capacity to add $500 million to $700 million in loans per year."
Based on loan size, the New York office is one of Centennial Bank's largest, although not the largest, market, French said.
Centennial has a staff of 38 in the downtown Manhattan office, which now includes a full-service branch that accepts deposits.
"[Poulton's] lending is certainly a specialized type of lending that takes some qualified lenders there," French said. "As we begin to generate deposits in that market, we'll have to expand a little bit more."
Centennial Bank has about $60 million in deposits in the New York office, Martin said. Martin said he expects deposits to grow to $200 million to $300 million over time.
Seventy percent of the office's customers are based in New York but 60 percent of the collateral is outside New York, said Martin, who has a hold rating on the bank. Martin owns no stock in Home BancShares.
Centennial is exploring the possibility of opening a West Coast office to accommodate customers, Martin said.
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