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Bank OZK OZK remains well-positioned for growth on the back of a diversified loan portfolio, efforts to improve fee income, organic expansionary moves and interest rate cuts. However, worsening asset quality and an elevated expense base are headwinds.
OZK’s Growth Drivers
Solid Growth Strategy: Bank OZK’s growth is significantly driven by a de novo branching strategy alongside its inorganic measures. The bank’s revenues reflected a compound annual growth rate (CAGR) of 10.8% over the last five years ended 2024, primarily driven by steady loan growth (which witnessed an 11.1% CAGR over the same time frame) and higher fee income (accounted for 4.3% of total revenues in 2024). The company will likely keep expanding through its retail branch network. Management expects to grow branch count by 10% by the end of this year from the current 232.
Revenue Growth
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Further, efforts to bolster fee income, growing emphasis on building a secondary mortgage banking business and a diversified loan portfolio will likely bolster top-line growth. We project total net revenues and loans to witness a CAGR of 4.1% and 4.2%, respectively, by 2027. The revenue growth will be primarily driven by net interest income (CAGR of 4.2%), trust income (CAGR of 9%), and loan service, maintenance, and other fees (CAGR of 9.8%).
Interest Rate Cuts to Aid Net Interest Margin: Bank OZK expects the net interest margin (NIM) to stabilize gradually as the cost of interest-bearing deposits (COIBD) declines in response to the Federal Reserve's interest rate cuts. Though NIM contracted in 2024 to 4.56% from 5.16% in 2023 as COIBD rose, the company expects COIBD to decline going forward.
NIM Trends
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Further, NIM expansion will be aided by time deposit repricing and variable loan rates hitting the floor in the second half of 2025. We estimate NIM to be 4.35% in 2025, 4.64% in 2026 and 4.75% in 2027.
Solid Balance Sheet: As of Dec. 31, 2024, Bank OZK’s total debt (comprising other borrowings and accrued interest payable and other liabilities) was $893.5 million, while cash and cash equivalents were $2.8 billion, demonstrating the strength of the balance sheet.
Moreover, at the end of 2024, its times interest earned of 31X witnessed an improvement. Hence, a robust liquidity position and earnings strength enable the bank to address its debt obligations, even in the event of economic turmoil.
Additionally, the company has been regularly hiking its quarterly dividends. In April 2025, it hiked its dividend for the 59th consecutive quarter. Also, in July 2024, the company announced a new share repurchase program worth $200 million with an expiration date of July 1, 2025. As of Dec. 31, 2024, about $199.5 million of buyback authorization remained available.
Thus, a strong balance sheet, robust capital position, lower debt-equity and dividend payout ratios compared with peers enable sustainable capital distributions.
Bank OZK currently carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have gained 3.6%, outperforming the industry’s growth of 0.2%.