Author Topic: OZRK - Bank of the Ozarks  (Read 35611 times)

abyli

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Re: OZRK - Bank of the Ozarks
« Reply #10 on: February 07, 2017, 10:57:09 AM »
We spent one month research OZRK a few months ago and we found that OZRK is the best bank in US. It is like focus value investing: if Warren Buffett is best allocating capital for BRK, why does he need to diversify into something else?
« Last Edit: February 07, 2017, 10:59:54 AM by abyli »


oddballstocks

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Re: OZRK - Bank of the Ozarks
« Reply #11 on: February 07, 2017, 11:02:30 AM »
What thepupil said plus look at their loan book.  I'm not sure how having 70% of your loans in construction loans is "conservative".

This bank essentially outran the crisis by rolling up other lenders faster than their own loans were going bad.

So where did those bad loans go? Guessing they just bought the good parts of those businesses?

(not arguing here at all.... just trying to understand the company more)

Most of their purchases were FDIC-Loss Sharing agreements.

Another red flag, their loan growth has come quickly:

2012: $2.67b
2014: $5.074b
2015: $8.273b
Q3 2016: $14b

They have almost doubled their assets in the last year.

Looks like some of their off the charts profitability has come from reducing their ALLL to almost nothing.

ALLL/NCL: 33%
ALLL/Loans .18%
NPL/Loans: .78%

In an environment where credit quality has peaked and is slowly getting worse they are dialing up.  Instead of increasing ALLL they're at a deficit and growing assets like crazy.
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oddballstocks

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Re: OZRK - Bank of the Ozarks
« Reply #12 on: February 07, 2017, 11:03:21 AM »
We spent one month research OZRK a few months ago and we found that OZRK is the best bank in US. It is like focus value investing: if Warren Buffett is best allocating capital for BRK, why does he need to diversify into something else?

I guess there you go.  This is THE BEST bank in the US..  That's why it's trading so high. 
The ultimate edge for bank investors: http://www.completebankdata.com

abyli

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Re: OZRK - Bank of the Ozarks
« Reply #13 on: February 07, 2017, 11:12:35 AM »
We spent one month research OZRK a few months ago and we found that OZRK is the best bank in US. It is like focus value investing: if Warren Buffett is best allocating capital for BRK, why does he need to diversify into something else?

I guess there you go.  This is THE BEST bank in the US..  That's why it's trading so high.

We bought at $35-$37 range, almost 52 week low. We checked why Mr. Andrew Left short this stock and thought those reasons do make any sense.

abyli

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Re: OZRK - Bank of the Ozarks
« Reply #14 on: February 07, 2017, 11:15:29 AM »
What thepupil said plus look at their loan book.  I'm not sure how having 70% of your loans in construction loans is "conservative".

This bank essentially outran the crisis by rolling up other lenders faster than their own loans were going bad.

So where did those bad loans go? Guessing they just bought the good parts of those businesses?

(not arguing here at all.... just trying to understand the company more)

Most of their purchases were FDIC-Loss Sharing agreements.

Another red flag, their loan growth has come quickly:

2012: $2.67b
2014: $5.074b
2015: $8.273b
Q3 2016: $14b

They have almost doubled their assets in the last year.

Looks like some of their off the charts profitability has come from reducing their ALLL to almost nothing.

ALLL/NCL: 33%
ALLL/Loans .18%
NPL/Loans: .78%

In an environment where credit quality has peaked and is slowly getting worse they are dialing up.  Instead of increasing ALLL they're at a deficit and growing assets like crazy.

They bought two regional banks in southeast area last year. Why assets should not go up then?

ASTA

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Re: OZRK - Bank of the Ozarks
« Reply #15 on: February 07, 2017, 11:18:17 AM »
thanks oddball for info yeah I bought at 34.16 so maybe should sell some to raise cash

SlowAppreciation

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Re: OZRK - Bank of the Ozarks
« Reply #16 on: February 07, 2017, 11:39:56 AM »
What thepupil said plus look at their loan book.  I'm not sure how having 70% of your loans in construction loans is "conservative".

This bank essentially outran the crisis by rolling up other lenders faster than their own loans were going bad.

So where did those bad loans go? Guessing they just bought the good parts of those businesses?

(not arguing here at all.... just trying to understand the company more)

Most of their purchases were FDIC-Loss Sharing agreements.

Another red flag, their loan growth has come quickly:

2012: $2.67b
2014: $5.074b
2015: $8.273b
Q3 2016: $14b

They have almost doubled their assets in the last year.

Looks like some of their off the charts profitability has come from reducing their ALLL to almost nothing.

ALLL/NCL: 33%
ALLL/Loans .18%
NPL/Loans: .78%

In an environment where credit quality has peaked and is slowly getting worse they are dialing up.  Instead of increasing ALLL they're at a deficit and growing assets like crazy.

Based on their history of loan losses, wouldn't they be justified to have lower ALLL though?

vox

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Re: OZRK - Bank of the Ozarks
« Reply #17 on: February 07, 2017, 11:53:30 AM »
I don't think their growth is a "red flag" for asset quality when it's mostly a result of acquisitions.

Two deals closed in 2016 which increased total assets by $5.5 billion, two deals closed in 2015 which increased total assets by $2 billion, and two deals closed in 2014 which increased total assets by $1.5 billion.

watsa_is_a_randian_hero

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Re: OZRK - Bank of the Ozarks
« Reply #18 on: February 07, 2017, 11:56:24 AM »
I went from long this at split adjusted $10.80 in 2011; sold out after a 50% gain in 5 months.  Watched the stock continue to tear, thought it was overvalued for years.  Finally re-evaluated the way I value them giving benefit for the roll ups and waited for an opportunity to buy back in.  Bought back in 2016 at 36.40. I've been holding since.  My current FV estimate is $56.  Given regulatory market and macro, I wouldnt sell unless it went significantly over my base case valuation. 

atbed

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Re: OZRK - Bank of the Ozarks
« Reply #19 on: February 07, 2017, 12:11:15 PM »
I understand where the shorts are coming from. But I reviewed many of OZRK's CRE loans and I am comfortable with the underlying development projects in the sample reviewed.

In NYC, the margins on high-end development projects are attractive. It does not cost significantly more to develop a high-end condo, but the price is much higher. This likely changes, but at the moment high margins create a degree of MOS for developers and OZRK. I think this is why OZRK and the developers are so aggressive while most of the industry is tightening their standards.

I also bought in the mid-30's last summer. But it is harder to get involved now. The price-to-book (~2.3x) is back to historical norms, so you really have to believe in management or the growth drivers (e.g. organic growth, acquisitions, interest rates, de-reg, tax cuts).
« Last Edit: February 07, 2017, 12:20:12 PM by atbed »